Petróleo Brasileiro SA (Petrobras) is a publicly listed fully integrated oil and gas company headquartered in Brazil, with 36.7% owned by the government of Brazil. In 2020, it had USD 5.28 billion in revenue and a reported 46,416 employees*. Petrobras continues to focus on oil and gas activities, with limited intention to initiate a large-scale transition to new low-carbon business activities such as renewable electricity.
Petrobras has a 2030 target to reduce scope 1 and 2 emissions from all its operations by 25%, alongside 2025 and 2030 targets for emissions reductions in its upstream and refining operations. These targets are not aligned with Petrobras’ 1.5°C pathway.
The company has not set a target covering its scope 3 emissions, which are its most significant source of emissions. Petrobras reports that it will reduce its scope 3 emissions through product innovation, but fails to provide a clear target, without which the company’s ambition and commitment to achieve this reduction cannot be assessed. Petrobras needs to set targets aligned with its 1.5°C pathway covering all of its emissions if it is to demonstrate readiness for the rate of change required by a low-carbon economy.
In 2019, Petrobras allocated 2% of its research and development (R&D) budget to low-carbon and mitigation technologies and increased this share to 10% in 2020. However, this increase is still far below the sectoral expectation for oil and gas companies to dedicate 77% of R&D to low-carbon innovation.
Petrobras allocated 2% of its R&D budget specifically towards carbon removal technologies in 2020, which, though closer to the sectoral expectation of 5%, can still be improved. To demonstrate its commitment to developing and increasing its adoption of low-carbon technologies, Petrobras should increase its R&D spending for low-carbon innovation in line with the levels required by the 1.5°C scenario.
Petrobras reports that it has a review process in place to monitor the climate change positioning of the trade associations it engages with. However, it does not disclose details on the criteria included in this review process or the course of action to be taken in the case of differing positions. Transparency in this area will add credibility to Petrobras’ climate-related engagements.
This is of particular importance given that Petrobras engages with some associations alleged to have a negative position towards climate policy. For example, the company is a member of the International Association of Oil & Gas Producers (IOGP), which is reported to have lobbied against the 100g CO2e/kWh threshold for electricity generation in the European Union Sustainable Finance Taxonomy.
Emissions from the combustion of Petrobras’ oil and gas products by its customers, i.e. sold product scope 3 emissions, are the company’s most important source of emissions. Petrobras’ locked-in scope 3 emissions from its upstream activities alone are expected to exceed its 1.5°C carbon budget by 66% between 2019 and 2050. Instead of focusing on and expanding its oil and gas activities, the company needs to plan a well-managed decline in production from its current oil and gas assets to achieve an emissions reduction rate aligned with its 1.5°C pathway.
The proportion of gas in Petrobras’ sold product mix increased from 12% in 2014 to 17% in 2019, while the share of refined oil products declined from 88% to 69% over the same period. Since gas is a less emissions-intensive combustion fuel than refined oil products, this has resulted in a marginally downward trend in the company’s sold product scope 1, 2 and 3 emissions intensity between 2015 and 2019.
However, the current rate of change in the company’s sold product mix is not sufficient to deliver the 4% annual reduction in emissions intensity required by its 1.5°C pathway. To achieve the necessary reduction, the company should rapidly increase the share of low-carbon products in its sold product mix.
Petrobras has a small portfolio of renewable electricity generation assets. This could represent a promising low-carbon business opportunity for Petrobras, given the company’s experience in the thermoelectricity generation business in Brazil. However, with no growth targets apart from a qualitative intention to increase its wind and solar presence in Brazil, and with no long-term deployment plans in place, Petrobras’ overall commitment to this business model appears limited.
Petrobras receives a trend score of -. If the company were reassessed in the near future, its score would likely decrease. Petrobras’ current fuel and sold product mixes are not sufficient to drive alignment with the company’s 1.5°C pathway. The limited ambition of its scope 1 and 2 emissions reduction targets and the lack of a scope 3 emissions reduction target suggest that the company’s performance is unlikely to improve.
Petrobras’ investment plans still focus on oil and gas activities. While it does have a small renewable electricity business, the company has limited deployment plans to scale this up and achieve the level of change required for a low-carbon transition in line with a 1.5°C scenario.
Petrobras has committed to a 25% reduction in absolute scope 1 and 2 emissions by 2030. Further, the company is targeting a 32% reduction in the scope 1 and 2 emissions intensity of its upstream operations by 2025, along with a 16% reduction in the scope 1 and 2 emissions intensity of its refining operations by 2025 and 30% by 2030. The company has set no targets to reduce its scope 3 emissions.
The company has not set out a clear roadmap to meet its low-carbon commitments. However, it is currently investing 2% of its capital expenditure (CapEx) in low-carbon and mitigation technologies annually until 2025. It is also taking action to address methane emissions in its upstream activities.
Petrobras has a small share of less than 1% of renewable electricity in its sold product mix. However, oil and gas, which received more than 85% of the company’s CapEx in 2019, remain the focus of the company’s activities and investments.
Between 2014 and 2019, increasing gas extraction and an increasing share of oil refined using the more emissions intensive coking technology put Petrobras’ scope 1 and 2 emissions intensity on an upward trend. However, the increased share of gas in sold product volumes put the company’s 1, 2 and 3 emissions intensity on a slight downward trend.
Petrobras’ level of ambition to reduce emissions is inadequate and the company lacks an emissions reduction target that covers its scope 3 emissions. The company’s low-carbon business areas are still in their nascent stages, but it is clear that Petrobras is not prepared nor committed to transitioning away from oil and gas activities.
More about the company
Rio de Janeiro, Brazil
RRL 27,400,000,000 (USD 5.28 billion)
Publicly listed with 36.7% owned by the government of Brazil