Brazil's oil development bonanza shapes up

Brazil's Petrobras, even as it eyes greater output for the future, exported a record 574,000 b/d of oil in October, breaking the previous monthly high of 532,000 b/d in April.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Nov. 4 -- Brazil's Petroleo Brasilerio SA (Petrobras), even as it eyes greater output for the future, exported a record 574,000 b/d of oil in October, breaking the previous monthly high of 532,000 b/d in April.

Altogether, Petrobras exported more than 17.8 million bbl in October, with exports bound mainly for the US (65.2%), China (24.1%), Europe (5.5%), and other South American nations (5.2%).

Analyst Global Insight said this "trend is expected to continue in the coming years as new fields come online, particularly those in the presalt layer, with the company planning to invest in new refineries in order to add value to its future oil exports."

BG sees 300,000 boe/d
Underlining future developments in the country, BG Group PLC said output from the Tupi, Iara, and Guara deepwater fields in the offshore Santos basin should hit 300,000 boe/d by 2012.

"First commercial production is now expected from the 100,000 b/d Tupi pilot by fourth quarter 2010," said BG, whose other partners in the fields are Petrobras and Galp Energia.

BG further said the exploration success with Guara and Iara has led the partnership to hasten planning on two additional 100,000 b/d pilot schemes, with the objective of achieving first production in 2012.

BG estimated its net share of reserves and resources in the Santos basin at 3 billion boe, of which 2 billion boe can be classified as proved or probable.

Low prices no deterrent
The recent fall in crude oil prices is not expected to adversely affect the developments, according to BG Group Chief Executive Frank Chapman, who said, "We are comfortable that these developments are economic at prices significantly below where we are today."

That view was shared by mines and energy minister Edison Lobao who said oil and gas production is viable at Brazil's subsalt reserves even with oil at $60/bbl.

"It's perfectly possible to exploit subsalt oil at this price. Of course, for the good of the country we'd want a bigger gain," he said.

Lobao said the much larger size of the subsalt reserves offsets the higher cost of subsalt exploration. "Drilling that lifts 5,000 or 10,000 b/d in a regular field could lift 50,000 or 100,000 b/d in the subsalt," he said.

ExxonMobil drilling
Meanwhile, ExxonMobil Corp. has started drilling in the presalt layer of Brazil's Santos basin, according to the firm's vice-president of investor relations David Rosenthal.

Rosenthal, in a conference call, said the West Polaris deepwater drilling rig arrived in Brazilian waters in late September, and after concluding the required inspections and clearances, the company has begun drilling the Azulao well on Block BM-S-22.

He said ExxonMobil chartered the rig for 3 years and expects to have its first results on BM-S-22 by yearend, although they could be delayed to early 2009.

"I wouldn't want to speculate on exactly when we'll make an announcement, but that will happen as soon as we are ready and have information to provide," said Rosenthal.

He added that plans to drill a second well on the block are under way and will follow immediately upon completion of the first well.

ExxonMobil is operator of the block, with a 40% stake, while Hess holds 40% interest, and Petrobras has the remaining 20%.

Chevron to start also
Chevron Corp. expects to begin production at its Frade field in Brazil's Campos basin next year. "First oil is expected during the second quarter of 2009," said Chevron Executive Vice-Pres. George Kirkland in a conference call.

Kirkland said construction of the FPSO scheduled to operate in the offshore field is 85% complete, and the vessel is due to set sail from Dubai in late December. Earlier, Chevron said production could reach 85,000 b/d in 2011.

Chevron is operator of Frade and holds a 51.7% stake, while Petrobras holds a 30% share, and Frade Japao owns the remaining 18.3%.

In another development, Inpex Corp. said it has received the Brazilian authorities' approval to acquire a 20% interest in offshore Block BM-C-31 in Brazil from Royal Dutch Shell. In addition to Inpex, Petrobras holds 60% and Shell 20% interest in the field.

In the coming year, an exploration well is scheduled to be drilled on BM-C-31, which covers an area of 710 sq km, some 150 km off the state of Rio de Janeiro.

Matto Grosso
Looking farther ahead, oil and natural gas exploration in Brazil's central-western Mato Grosso state may begin in 2010, according to the state's governor, Blairo Maggi.

Brazil's oil, gas, and biofuels regulatory agency ANP will hold its 10th oil and gas exploration and production rights auction on Dec. 18-19, offering some 130 onshore blocks, located in eight sectors, in seven sedimentary basins.

According to Maggi, the auction will include rights for six blocks in his state, including an area of 14,381 sq km in the onshore Parecis basin, near the Teles Pires River.

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