Petrobras signs 2nd E&P JV deal

Petroleo Brasileiro SA has signed its second Brazilian upstream joint venture with foreign firms, this time with a group led by Coastal Corp., Houston.

The first such JV was signed with a group led by Argentina's YPF SA, late last month (OGJ, Oct. 26, 1998, p. 40). Petrobras's 45-year-old monopoly on Brazil's petroleum sector was marked for dissolution when the Brazilian Congress approved a petroleum deregulation law in August 1997. To date, Petrobras has signed only small-scale JV contracts, because most oil companies are waiting for a review of Brazil's cumbersome oil tax structure, a Petrobras official told OGJ.

JV contract

Petrobras signed a $10.4 million JV contract on Oct. 23 with Coastal unit Coastal Oil & Gas Corp., Unocal Corp., and Brazilian refined products marketer Empresa Ipiranga SA, covering exploration and production work in the Camamu basin off Bahia state.

Although the initial project involves a $10.4 million investment, Petrobras said that ultimate investments by the group could reach $100 million. Under this new joint venture contract, Coastal will be operator through a Brazilian affiliate, with a 40% stake; Petrobras will have 40%; and Unocal and Ipiranga each will have 10%.

According to Petrobras, the two blocks to be explored, BCAM-2 and BAES-97, offer development potential as well as being prospective for further exploration. Discovered reserves are estimated at 54 million bbl of crude oil.

Under the terms of the 3-year agreement, Coastal, Unocal, and Ipiranga will drill one well on each block.

Coastal strategy

"The main focus of our company is natural gas, and our long-range plans include constructing a natural gas distribution network, starting in the Camamu basin going to Salvador, capital of Bahia state, continuing to Recife, capital of Pernambuco state, and to Fortaleza, capital of Ceara state," said David A. Arledge, Coastal chairman and CEO.

Coastal has had a commercial relationship with Petrobras for more than 30 years. In August 1997, Coastal opened an office in Rio de Janeiro in response to emerging investment opportunities, incuding projects in refining and marketing; power generation and distribution; and gas production, processing, and transmission.