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Brazil's PRIO farms in Peregrino field, extending its footprint in Campos Basin
PRIO reinforced its position as Brazil’s largest upstream independent operator following its move to acquire Sinochem’s 40% participating interest in the Peregrino field for $1.92 billion. PRIO adds over 30,000 barrels per day (bpd) to its production through this offshore asset, currently operated by Norway-based Equinor. The field has similar characteristics to PRIO’s other development Polvo, as both produce heavy oil from shallow waters through a combination of fixed platform and FPSO in the Campos Basin. With the 27 September announcement, Sinochem has farmed out from its only asset in Brazil after almost 15 years in the country. The company last year closed its activities in Ecuador and now is only present in Colombia in South America.
The Peregrino field was discovered in 1994 and produced its first oil in 2011, marking Equinor’s entry to South America in what would, to this day, be the largest field operated by the company outside Norway. The first phase of the field comprised an Equinor-owned floating production, storage and offloading vessel – FPSO Peregrino – and two wellhead platforms – A and B. The FPSO is capable of processing 100,000 bpd of oil and storing 1.6 million barrels. The second phase of the development consisted of a third wellhead platform (Platform C) and new wells, with a new pipeline to import gas to the platform for power generation and replace diesel generators. There are around 250 million barrels of remaining recoverable resources in the field.
PRIO was reportedly in discussion with Sinochem. The deal was finally announced at the end of last month just as ROGe – the biggest Rio de Janeiro-based oil and gas event in South America – ended, with Sinochem selling its 40% stake in the field in Block BM-C-7. PRIO will pay 10% of the amount at the signing of the contract and the remaining 90% once the transaction is completed.
This deal virtually doubles the amount of M&A transactions in Brazil during the current year. With this, the 2024 deal value is close to the $4 billion average of the past five years. The last significant acquisition from PRIO was the Albacora Leste field in 2022, bought from Petrobras for $1.95 billion before Petrobras halted its divestment program.
PRIO continues to use mergers and acquisitions (M&A) as a vehicle for rapid inorganic growth. The independent has consolidated itself as one of the biggest producers in the Campos Basin, second only to Petrobras. Building a cohesive portfolio, PRIO aims to find synergies and opportunities to bring down costs. As highlighted in the press release, the company sees the potential to optimize the commercialization of the oil output, as the field is close to the Polvo and Tubarao Martelo clusters, and the offtake operations of those fields can be combined into a single cargo. The image below highlights PRIO’s currently producing fields and those under development. The Peregrino field and the Polvo and Tubarao Martelo cluster are separated by 28 kilometers (17.4 miles), while the tieback from Wahoo to Frade will be shy of 30 km. PRIO’s CEO, Roberto Monteiro, did not hide his interest in farming in the whole Peregrino field, eventually showing how strategic this field is and demonstrating the company’s appetite for opportunities.
With the added production from 40% of the Peregrino field, PRIO strengthened its position as the largest independent in Brazil and will remain the fourth-largest oil company in Brazil in terms of entitled production, behind only Petrobras, Shell and TotalEnergies. Compared to the companies in South America, PRIO will move one notch higher, from the seventh to the sixth-largest producer, excluding the majors and national oil companies.
Equinor, in partnership with Sinochem, has done a very noteworthy job in the Peregrino field. As mentioned before, it is a development with over 15 years of operation, extracting heavy oil (API 13.5) from shallow waters. Initially, the facility ran on diesel, which represented an emissions intensity of around 30 kg CO2/boe. As a part of the phase 2 development, the power generation fuel was changed to gas, supplied by the Rota 2 pipeline. This switch halved the emissions intensity of the field to the current level of 14 kg C02/boe. This is an impressive change and in line with Equinor’s objectives of reduction of scope 1 and 2 emissions. However, as shown in the figure below, Peregrino still has a larger carbon footprint than 86% of all Equinor-operated production currently.
Finally, looking at the deal from a sell-side perspective, Sinochem has landed a long-awaited deal, as it had first expressed its intention of selling this asset in 2017. After buying the 40% stake from Equinor in 2010 for more than $3 billion, Sinochem participated with over $3 billion in capital investment over the years and retrieved over 100 million barrels of oil equivalent produced.
Authors:
Aditya Ravi
Partner, Upstream Research
aditya.ravi@rystadenergy.com
Flavio Menten
Analyst, E&P Research
flavio.menten@rystadenergy.com
(The data and/or forecasts in this column are Rystad Energy’s, and the opinions are of the authors.)