Brazil at a Crossroads: Rethinking Petrobras oil and gas expansion

Brazil plans to expand oil and gas production by 20% by 2030. National oil company Petrobras accounts for more than half of this planned expansion. In a joint report, the International Institute for Sustainable Development, WWF-Brazil, and the World Benchmarking Alliance analyzed the economic risks to this approach and compared Petrobras’ climate performance to other oil and gas companies.

The report shows the following:

• Up to 85% of oil in Petrobras’ new projects is not economically viable to extract in a scenario compatible with holding global warming to 1.5°C, the international goal. Petrobras’ riskiest ventures would only be profitable in a world where global warming exceeds 2.4°C.
• Petrobras plans to sink USD 97 billion into exploration, production, transportation, and refining of oil and gas from 2025 to 2029. Only 15% of its budget is to decarbonize operations and diversify into clean energy.
• Petrobras lags behind leading oil and gas companies on climate performance measures. There is significant room for improvement in the carbon intensity of its products, emissions targets, and diversification strategy.

Policy Recommendations

• The Brazilian government should make a roadmap to curb domestic oil and gas expansion: stop issuing fossil fuel exploration licences and phase out development licences, starting with assets most likely to become stranded under low-carbon pathways.
• The Brazilian government should redefine Petrobras’ mandate: work with Petrobras on a credible, ambitious transition plan in line with climate goals and adopt a “harvest mode” strategy to maximize cash flows and shareholder returns by avoiding capital expenditure on oil development.
• The Brazilian government should encourage Petrobras to redirect investment away from new oil fields. This could prevent between USD 13 and USD 36 billion in stranded asset losses for Petrobras, depending on the speed of the energy transition.