Brazil’s state-owned Petroleo Brasileiro SA (Petrobras) plans to invest, along with partners, $18 billion over the next 10 years for oil and gas development in the offshore Santos basin.
Petrobras’s board determined that the first large volume of gas from the Santos area should flow in second-half 2008, when Petrobras expects output of 12 million cu m/day from Mexilhão and Merluza fields. A new business unit is being set up in the coastal city of Santos, São Paulo.
Company officials expect the BS-500 Block-the largest of five planned production areas in the basin-to start producing 20 million cu m/day of gas and 150,000-200,000 b/d of crude oil in 2010.
Petrobras and Repsol YPF SA are negotiating to develop Mexilhão field jointly (OGJ Online, Nov. 18, 2005).
“A JV between our company and Petrobras will probably be defined within the first half of this year, but we still lack important technical information to make a final decision,” João Carlos de Luca, president of Repsol YPF in Brazil, told OGJ.
According to Francisco Nepomuceno, Petrobras executive manager for exploration and production, a key factor will be a production test of a 1,000 m horizontal well that has been drilled. Test results are expected within 2-3 weeks.
Mexilhão field reservoirs are estimated to hold 224 billion cu m of gas. Petrobras is developing 10 blocks in the basin on its own and 19 in partnerships with other companies, including ExxonMobil Corp., BG Group PLC, and El Paso Corp.
The Brazilian oil company will establish the price of the gas. Because its priority is to produce gas for the domestic market, this may conflict with partner companies’ exporting plans, oil company executives point out. The deregulation law of 1997 allows any company to export crude oil, but the government is working on gas regulation.
Apart from Merluza field, which now produces 1.2 million cu m/day but should increase to up to 10 million cu m/day by 2010, Petrobras expects to produce gas and crude from the southern and central areas of the Santos basin.
The southern area, which contains Coral and Cavalo-Marinho fields and others, should produce 3 million cu m/day of gas and 140,000 b/d of oil. The central area is still being explored, Petrobras said.
Brazil’s gas needs
Brazil is struggling to increase gas production to meet booming domestic demand and reduce dependence on imports from neighboring Bolivia, where leftist President-Elect Evo Morales will take office on Jan. 22 (OGJ Online, July 6, 2005).
Brazil imports about 24 million cu m/day of gas through the Bolivia-Brazil pipeline. The Brazilian government is concerned by Morales’s threat to nationalize the gas industry. Petrobras has major operations in Bolivia.
Brazil produces about 40 million cu m/day of associated gas, part of which is reinjected or flared. Gas consumption in Brazil is expected to more than double by 2010 to more than 100 million cu m/day, says Petrobras.
Petrobras also reported that over the last year about 4 billion bbl of oil and 419 billion cu m of gas have been discovered in Brazil.
According to some analysts, the large gas reserves discovered by Petrobras in the Santos basin could change the Brazilian energy mix. The increase in gas supply in 6-8 years could replace more-polluting fuels, such as gasoline and oil, and lower operation costs for thermal power plants.
Analysts caution that it is too early to determine the cost of developing and distributing Santos basin gas, pointing out that a pipeline from Santos basin to Sao Paulo, Brazil’s largest market, could cost around $1 billion just to build.
Petrobras and partners hold license to 40,663 sq km in the Santos basin off the states of São Paulo, Rio de Janeiro, Santa Catarina, and Paraná. ✦