Petrobras officials expect to fall short of the Brazilian government targets for reducing natural gas prices by 40% due to the high cost of extraction in very deep waters.
The company executives believe a price cut of this magnitude is not possible given that Petrobras extracts gas 300 km from the coast and faces much higher production costs compared to onshore shale gas drillers offshore.
The Brazilianstate oil giant is under increasing pressure to cut energy prices just as President Luiz Inacio Lula da Silva tries to steer the economy in a more populist direction, adding to market concerns about political interference.
Brazilian President Luiz Inacio Lula da Silva promised to revitalize Brazilian industrial activity, which relies on fuel for power generation.
Brazil’s Ministry of Mines and Energy said Petrobras was devoting a lot of gas to helping crude production and could lower the price to $7-8 per million British thermal units from $12 now if it managed the resource differently.
Petrobras argues that using gas to pressure wells brings more oil to the surface and raises the recoverable volume of pre-salt fields by up to 30%.
