El Paso, Unocal take stake in Petrobras pipeline, production facilities
El Paso Energy International and Unocal Corp. have signed a definitive agreement with Petroleo Brasileiro SA to acquire an interest in the Pescada-Arabaiana oil and natural gas pipeline and production project in Brazil. El Paso and Unocal hold stakes in a 50-50 joint venture called Potiguar II SARL. Potiguar II will purchase from Petrobras 114 km of oil and gas pipeline, including 73 km of 26-in., multiphase mainline and related production facilities in northeastern Brazil.
El Paso Energy International, a subsidiary of Houston-based El Paso Energy Corp., and Unocal Corp., El Segundo, Calif., have signed a definitive agreement with Brazil's Petroleo Brasileiro SA to acquire an interest in the Pescada-Arabaiana oil and natural gas pipeline and production project in Brazil.
El Paso Energy International and Unocal hold stakes in a 50-50 joint venture called Potiguar II SARL. Potiguar II will purchase from Petrobras 114 km of oil and gas pipeline, including 73 km of 26-in., multiphase mainline and related production facilities in northeastern Brazil. The JV also will acquire from Petrobras proved, developed reserves totaling 22 million bbl of oil and condensate and 345 bcf of gas, as well as six offshore platforms and 10 wells.
The agreement covers the acquisition of an initial 79% participating interest from Petrobras in five concession areas containing five proven oil and gas reservoirs, plus an initial 35% interest in a 55,000-acre exploration block, BPOT-1. Petrobras will retain the remaining interests. The ownership percentages will be adjusted in the future in accordance with the economic performance of the project.
The agreement grants the JV the right to explore, develop, produce, and sell oil and gas. The concession areas are located in 65 ft of water offshore of the northeastern Brazilian state of Rio Grande do Norte in the Potiguar basin. This basin is the second largest hydrocarbon-producing basin in Brazil, with current average production of 110,000 b/d of oil and 100 MMcfd of natural gas.
Oil production will be transported to shore at Petrobras's existing processing plant in Guamare, where it will be sold to the Brazilian firm. The gas production will be sold primarily to Petrobras and transported to growing markets in a seven-state area in northeast Brazil via an existing high-pressure 1,500-km gas transmission system.
Annual gross production from the Pescada-Arabaiana project is expected to reach 6,500 b/d of oil and 55 MMcfd of gas by 2003 from 10 wells. The producing fields include Pescada (gas-condensate), Arabaiana (natural gas), and RNS-33 field (oil). The project also includes proved, undeveloped oil and gas resources on Blocks RNS-93 and RNS-128, says Unocal.
An exploratory well will be drilled on BPOT-1 Block prior to August 2001 and two additional production platforms will be installed in 2001, says Unocal. Petrobras will continue as operator of the project.
Unocal estimates that its total investment in the project may reach $80 million over the next 3-5 years. Total net finding, development, and acquisition costs, after royalties, are estimated to be $4-5/boe.
"The Pescada-Arabaiana Integrated Project brings immediate earnings and proved reserves to Unocal, as well as upside potential for additional production and reserves in the near future," said Sergio Brandao, managing director of Unocal's Brazil business unit. "This project will balance Unocal's exploration portfolio with an interest in producing assets in Brazil and is expected to generate earnings and cash flow to fund Unocal's broader exploration program on its deepwater offshore blocks in the country."
The coastal states in Petrobras's area of operation in northeast Brazil have a population of approximately 45 million, and the region currently experiences a severe need for gas-fired power generation.
"We see this acquisition as an extension of El Paso Energy International's significant commitment to integrated energy projects in Brazil," said John Hushon, president of El Paso Energy International. "It is also the next key step toward expanding our strong regional alliance with Petrobras."
El Paso Energy International has a leading presence in the Brazilian energy market as the first independent power producer in Brazil, and now the largest, it says. The firm participated in the development and implementation of the fully operational 3,000-km Bolivia-to-Brazil gas pipeline.