ANP: Brazil to build on momentum from robust presalt bid round

Brazil plans to use many approaches as it tries to maintain the momentum from its successful Oct. 27 presalt production-sharing bidding round that raised $1.9 billion in signing bonuses, the leader of its National Petroleum, Natural Gas, and Biofuels Agency (ANP) told a Washington audience on Nov. 16.

Brazil plans to use many approaches as it tries to maintain the momentum from its successful Oct. 27 presalt production-sharing bidding round that raised $1.9 billion in signing bonuses, the leader of its National Petroleum, Natural Gas, and Biofuels Agency (ANP) told a Washington audience on Nov. 16 (OGJ Online, Oct. 30, 2017).

“For the first time, we’re seeing a very different oil and gas environment in Brazil, not only upstream but in refining and marketing and in natural gas,” Decio Oddone said during a presentation at the Woodrow Wilson International Center for Scholars. “There could be a completely different oil and gas business in Brazil by 2020, and the companies which invest now will be the winners.”

Brazil’s crude oil production, which averaged 2.5 million b/d, make the country the world’s 10th largest and Latin America’s biggest producer, Oddone said. Production could reach 5-6 million b/d by 2027 if bidding rounds in 2018 and 2019 realize their potential, he said.

“Brazil’s production now is where Mexico and Venezuela’s were before they declined,” noted Anthony Harrington, who was US ambassador to Brazil from 1999 through 2001 and now chairs the advisory council at the Wilson Center’s Brazil Institute, which hosted the event.

Removing a requirement for national oil company Petroleos Brasileiro SA (Petrobras) to be sole operator of new presalt concessions, developing a multiyear bidding calendar, and moving to make local content requirements more flexible have helped make foreign investments in Brazil’s oil and gas more attractive, he noted.

Oddone said a key to the country’s strategy is to seek upstream partners that are best suited to Brazil’s three general oil and gas provinces: supermajors for the presalt, majors and exploration specialists for its offshore, and small and medium-sized operators for mature fields.

Missed opportunity

Upcoming presalt bidding rounds will contain 41 areas that were excluded in the ninth round 10 years ago, he said. If the blocks had continued to be offered, ANP estimates there would have been $600 billion reais of investments and 520 billion reais in collections of royalties, income, and windfall profit taxes as 30 new platforms increased production by 4.3 million b/d going into 2018.

Brazil’s presalt could be the largest contributor to production outside the Organization of Petroleum Exporting Countries in the next decade after producing 50% more revenue than expected in October, Oddone said. “For 2018, we’ll have our 15th bidding round with an estimated 12 billion bbl in place. We’ll also offer blocks close to the presalt in the Campos and Santos offshore basins,” he said.

ANP also wants to increase conventional offshore exploration in its East and Equatorial margins, Oddone said. Following a 30% drop in production since 2010, the goal is to increase production and recovery rates in these mature areas, particularly from the Campos basin where the recovery rate is only 24%, he said.

Revitalizing Brazil’s 312 onshore fields, where production has fallen 10% and the number of development wells drilled has dropped 80% since 2010, will require more than small and mid-sized mature field specialists, Oddone said. Petrobras will need to divest more of its assets, reserve-based lending will need to be authorized, and royalties will have to be reduced, he said.

“We also want to be able to issue more local content waivers to stimulate investment,” he said. “If our mature fields recovery plan succeeds, there will be $18 billion of new investments, which could produce another 2.2 billion boe/d. Our goal is to have a rolling 5-year calendar to combine with available acreage notices. Auctions will be reserved for areas with the most potential.”

Oddone said presalt recovery costs have dropped from $45/bbl to $35/bbl, “and there’s talk they could go to $20[/bbl].”

Contact Nick Snow at nicks@pennwell.com.

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