Peter Howard Wertheim
OGJ Correspondent
RIO DE JANEIRO, Sept. 8 -- Executives of Brazil's state-owned oil firm Petroleo Brasileiro SA (Petrobras) reported at a recent press conference that the estimated reserves of 70 billion cu m of nonassociated natural gas reported last April for Blocks BS-400 and BS-500 in Santos Basin off São Paulo state were revised to 419 billion cu m after additional production tests.
Petrobras's exploration and production director Guilherme Estrella told OGJ that the estimates of gas volumes contained in the blocks increased after a new well was drilled, but he declined to add details.
Block BS-400, where the reevaluation was announced, is 137 km from São Sebastião, Brazil. A well, which was drilled in 485 m of water found a gas reservoir at 4,956 m. São Paulo is Brazil's main consumer market, responsible for about 40% of Brazil's gross domestic product.
Estrella said that it is going to take 2-4 years to consolidate the reserve data. After that, he said, it could take another 4 years to develop the blocks. "We are seeing the emergence of an energy company. The revised natural gas figures will cause major changes in Petrobras's strategic planning and investments this year," he added.
Discovery represents 'revolution'
According to Petrobras's Gas and Energy Director Ildo Sauer, the discovery represented a "revolution" on the Brazilian gas market and could have the capacity to produce around 55 million cu m/day of gas for a 20-year period, surpassing Petrobras's current 46.2 million cu m/day total gas production.
Sauer added that the gas found was nearby an important crossing point of pipelines, which should help distribution.
According to some analysts, Brazil might find itself sitting on its reserves without being able to sell much due to the disappointing development of Brazil's thermoelectric program. Other analysts ponder that although the government works to boost the utilization of gas, regulatory problems in the electricity sector have so far thwarted investment in new gas-fired projects.
Countering imports from Bolivia
Currently Petrobras imports about 18 million cu m/day of gas from Bolivia under a take-or-pay contract, which forces the Brazilian company to pay for 24 million cu m/day.
Oscar Prieto, president of Companhia de Gás de São Paulo (Comgás), which is controlled by British Gas and Royal Dutch/Shell Group and is the largest gas distributor in Brazil, said that "the Santos Basin discovery will help to expand the consumer market because the supply of Brazilian natural gas is small and the gas imported from Bolivia is expensive."
According to Petrobras, Bolivia's natural gas is costing $3.30/MMbtu while Brazilian gas costs $2.50/MMbtu.
Brazil has been negotiating with Bolivia a change in the take-or-pay clause, but without any success. Analysts say that with the huge discovery, Petrobras will be in a stronger position to negotiate with Bolivia, a fact that has already been acknowledged to the Brazilian press by Bolivia's Hydrocarbon Minister Jorge Berindoague.
As a result of the discovery, Petrobras is working to increase the gas share in the country's energy mix to 10% from the current 3% by the end of the decade.
José Augusto Marques, president of the Brazilian Association of Basic Industries, however, is skeptical about the feasibility of this target. He said that the Petrobras's target could only be achieved through large investments for infrastructure and clearly implemented regulations for the gas sector.
Investments, discoveries continue
José Sérgio Gabrielli, Petrobras's finance and investors relations director, said the company is investing $1.1 billion this year to improve its gas pipelines and distribution networks, especially in Brazil's more industrialized Southeast and in the less-developed Northeastern region. The company is also planning to integrate its networks so that gas from the more-productive Southeast can be transported to the country's more-isolated areas.
Estrella also referred to a string of oil and gas discoveries this year which may shift Petrobras's reserves profiles from heavy crude to light oil and natural gas. The company recently reported light oil discoveries in Sergipe-Alagoas, Espirito Santo, and Santos basins.
The directors also provided new reserve estimates for a previously announced oil find in Santos basin, putting it at 435 million bbl of light oil.
Petrobras imports lighter oil to mix with the heavy crude it produces locally. Once production begins in wells containing lighter crude, Petrobras expects to significantly reduce its costs and help Brazil's trade balance.
As of yearend 2002, Petrobras's total proven reserves were 9.56 billion bbl of crude oil and 236.5 billion cu m of natural gas. The company produces an average of 44 million cu m/day of gas and reinjects 8.5 million cu m/day back into wells. Currently, Brazil's gas consumption stands at about 30 million cu m/day.
