Petrobras plans $18 billion gas development

Aug. 18, 2006
Bolivia President Evo Morales's decision May 1 to take control of the country's oil and gas fields has prompted Brazil to seek alternate gas suppliers.

Peter Howard Wertheim
OGJ Correspondent

RIO DE JANEIRO, Aug. 18 -- Bolivia President Evo Morales's decision May 1 to take control of the country's oil and gas fields has prompted Brazil to seek alternate gas suppliers. Brazil's state-owned Petroleo Brasileiro SA (Petrobras) is revising its domestic and international investment plans. Half of Brazil's gas needs are met by Bolivian exports.

The Brazilian company is negotiating with Bolivia on how much Morales's government might pay for the control of Petrobras' production, refining, and distribution assets in the country, said Nestor Cerveró, director of the company's international affairs.

Simultaneously, talks are continuing with Bolivia over an increase in natural gas prices. Morales plans to raise gas export taxes to as much as 82%. This may cause Brazilian gas prices to rise as much as 15%. Under a contract that extends to 2019, Petrobras buys Bolivian natural gas for less than half the price of natural gas in North America.

Domestic production plans
Petrobras officials said plans include development of two new oil and natural gas fields in southeastern Espírito Santo state and the increase of Marlim field gas production in the Campos basin off Rio de Janeiro and Merluza field in the Santos basin.

Petrobras has set up a 10-year, $18 billion master gas plan for the Santos basin area that will result in 12 million cu m/day of gas production by the second half of 2008 and 30 million cu m/day by yearend 2010.

The company also is investing $6 billion to build 4,000 km of gas pipelines in Brazil and improve shipment of the fuel to Brazil's north, northeast, and southeast regions by 2008, said Petrobras Pres. José Sergio Gabrielli.

Brazilian natural gas use is growing at about 20%/year, representing about 8% of all energy used in Brazil.

Brazil's current gas reserves are 297 billion cu m. The pay zone is in sandstones of the upper cretaceous age in the Maastrichian, Campanian, and Santonian formations.

The company has divided the Santos basin into zones, or poles. The Merluza pole off São Paulo produces more than 1.18 million cu m/day of gas now. It will expand platform capacity to raise production from Merluza and Lagosta fields and the SPS-25 well area to 2.49 million cu m/day in 2008 and as much as 99.8 million cu m/day in 2010.

Mexilhão gas field, in water 172 m deep some 265 km offshore in Block BS-400, is the strong link in the gas play. Mexilhão and nearby Cedro hold 418.84 billion cu m of gas reserves that will produce from seven subsea wells to a shallow-water platform. A centralized network of gathering pipelines from the producing fields will be tied in to the platform.

Plans call for production of 9 million cu m/day in 2008, increasing to 15 million cu m/day in 2010. Petrobras will use an FPSO in the first production phase, while the second phase will tie in peripheral discoveries and deeper production to a fixed platform about 13 miles from the field.

Petrobras and Repsol YPF have agreed to jointly explore for additional reserves on Block BS-400.

Petrobras estimates another potential in the Santos basin: 20 million cu m/day of gas and 200,000 b/day of oil from Block BS-500.

In the southern pole, Coral field already produces some 9,000 b/d of oil, and Cavalo-Marinho field, due to come on stream in 2008, should double that. Additional projects could add another 140,000 b/d of oil and 3 million cu m/day of gas.

The final pole is the center area, which has exploratory potential for cluster development. If it lives up to its potential, production could be tied back to Mexilhão.

New platform ordered
SembCorp Marine said its Brazilian shipyard Mauá Jurong in July secured a $550 million engineering, procurement, and construction contract from Companhia Mexilhão do Brazil to build a fixed gas-processing platform, the PMXL-1, to be installed in Mexilhão field.

Construction commenced recently, with delivery mandated by November 2008. Upon installation, Mauá Jurong will undertake the hookup and commissioning at the offshore location until first gas production at month 36 of the contract and will provide assisted operation to month 45.

The platform will have a 12,000-ton deck that includes a 15 million cu m/day natural gas production plant. Mauá Jurong will design the topsides deck and processing plant to conform with the owner's front-end engineering design and will fabricate the jacket and piles to the owner's design. The topsides deck will be seated on a 180 m tall tubular structure jacket weighing 10,500 tons and duly seated and piled to the seabed through 3,150-ton tubular steel piles up to 120 m long.

High growth forecast
Petrobras forecasts an enviable growth rate in supply of over 10%/year. Ildo Sauer, the company's director for gas and energy, estimates that daily Brazilian demand for natural gas will double by 2011 to 121 million cu m/day, 70% of which will be supplied by gas produced in Brazil and the remaining 30% imported from Bolivia.

Petrobras aims at increasing its production from 40 million cu m/day to 71 million cu m/day. The remaining internal demand would be covered by production of 20 million cu m/day of regasified liquid petroleum gas (LPG) and with 30 million cu m/day of natural gas imported from Bolivia.

To meet the natural gas targets, a significant part of the investment will go toward renting two floating storage and regasification ships to store and regasify LPG.

"This is the fastest and cheapest option," Sauer explained.