Brazil's fortunes wax, wane with exploration interest, gas finds

By OGJ editors
HOUSTON, Sept. 9 -- Brazil might have to decide whether it wants to sweeten its exploration fiscal terms or live with state oil firm Petroleos Brasileiro SA (Petrobras) as the only significant, long-term player, a speaker told a Houston conference Tuesday.

Meanwhile, the same speaker said that Petrobras has announced gas discoveries in the Santos basin that could be large enough to change the country's natural gas supply and price dynamics.

Winning bids in Brazil's licensing rounds have declined from $3,800/sq km in the mid-1990s to $400/sq km in the most recent round, said Michael J. Dyer, director of the Americas, IHS Energy Group, Houston. He attributed the falloff to noncompetitive fiscal, tax, and royalty regimes as well as environmental barriers to seismic acquisition and drilling.

Industry has spent $4.5 billion since the acreage opening with almost no oil or gas discovered, said Dyer, a citizen of the US and Brazil. He spoke at the American Association of Petroleum Geologists Prospect & Property Expo.

Dyer said Petrobras, Houston-based El Paso Corp., and a Royal Dutch/Shell subsidiary have separately announced Santos basin gas successes, with Petrobras claiming the discovery of as much as 14.8 tcf off São Paolo (OGJ Online, Sept. 8, 2003).

The discovery on Block BS-400 would require an 8-year lead time to production via a 200 km pipeline to shore. OGJ attributed 8 tcf of gas reserves to Brazil as of Jan. 1 (OGJ, Dec. 23, 2002, p. 115).

Another speaker, Kurt Neher, chief geologist, Occidental Oil & Gas Corp., said his company generally avoids new entry into the most highly competitive exploration areas but is now taking a hard look at Brazil. He said Oxy is looking "throughout the continent" but did not specify which basin or basins.

Latin America, the Middle East, and the US are the present core areas for Oxy, which reorganized its company risk profile in the late 1990s.

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