Brazil's Pre-Salt Reserves to Boost Latin American Oil Production Growth

- Brazil's Pre-Salt Reserves to Boost Latin American Oil Production Growth

Friday, August 19, 2011
Rigzone Staff
by Karen Boman

Brazilian state energy company Petrobras' plans to develop its offshore pre-salt oil reserves will contribute in part to what Barclays Capital calls a "sizable upward shift" in hydrocarbons production through 2011 through 2020, according to Barclays' Global Energy Outlook. Brazil and Colombia are expected to experience increases hydrocarbons production during that time period, most concentrated in oil versus natural gas, Barclays noted.

Petrobras has unveiled plans to spend US $127.5 billion, or 57 percent of the resources under Petrobras' 2011-2015 Business Plan of US $224.7 billion, on exploration and production efforts. The company plans to increase total oil and gas output from 2.7 million boe/d in Brazil and abroad to 4 million in 2015 and 6.4 million in 2020.

Pre-salt output alone will add up to nearly 2 million boe/d in 2020, pushing the pre-salt's contribution to production from two percent today to 18 percent in 2015 and 40.5 percent by 2020. Petrobras will achieve this growth by setting up 30 extended well tests over the next five years, including 20 in the pre-salt cluster, and 10 in the post-salt area. Additionally, the company will spend US $1.3 billion per year on technology, which will include funding for efforts explore new frontiers, oil recovery and develop a new generation of offshore and undersea production systems.

Petrobras last month also confirmed the commercial potential of its Lula discovery in the pre-salt Santos Basin in water depths ranging from 6,890 feet to 7, 218 feet. Lula produced 28,436 b/d, according to Subsea IQ, and is the first well to produce from Brazil's high touted pre-salt offshore reserves. The well is interconnected to Cidade de Angra dos Reis FPSO and is the first of six production wells to be connected to the FPSO. Petrobras expects for the FPSO to produce around 100,000 b/d d throughout 2012.

Other companies are seeing significant potential in Brazil's pre-salt area. BG Group in June upgraded its estimate of its pre-salt Santos Basin interests to some 6 billion Boe net to BG Group with an upside potential of 8 billion BOE net. The new estimates results from the company's internal analysis of data gathered from drilling, appraisal and other data, including data collected from 29 wells drilled in BG's existing discoveries.

"Robust economics and solid progress with the fast-track development program will see gross installed production capacity rising steadily to reach more than 2.3 million boe per day by 2017," said BG Group Chief Executive Sir Frank Chapman.

Other companies active offshore Brazil include OGX, which has identified the presence of hydrocarbons in the Santonian section of well 1-OGX-47-RJS in the BM-S-59 block in the shallow waters of the Santos Basin, according to Subsea IQ. The operator found a hydrocarbon column of about 430 feet in sandstone reservoirs of the Santonian section with about 167 feet of net pay. The OGX-47 well, named Maceio, lies about 68 miles off the coast of Rio de Janeiro in a water depth of 607 feet. The Ocean Quest semisub drilled the well.

Chevron reported last month that it plans to drill a well later this year in the pre-salt section beneath its Frade field offshore Brazil. The company will drill the well using Transocean semisubmersible Sedco 706, according to RigLogix. "If successful, we'll be in a great position to take advantage of our existing production facilities," said George Kirkland, vice chairman and EVP of Global Upstream and Gas at Chevron.

Petrobras' ambitious drilling plans include constructing newbuild rigs within Brazil; these plans make it likely that service companies will beef up investments in Brazil to meet their customers' needs. National Oilwell Varco (NOV) this week signed contracts to supply drilling equipment packages for seven drillships to Estaleiro Atlantico Sul, including drilling riser and pressure control equipment. The value, over the term of the deliveries, is approximately $1.5 billion. Pete Miller, Chairman, President and CEO of National Oilwell Varco, said the company is investing heavily in Brazil to manufacture more of the products and technologies National Oilwell Varco provides to its oil and gas customers, and to service the rapidly growing installed base of NOV drilling equipment in the region.

Sedco 706

The significant distance at which pre-salt reserves lie offshore Brazil means that operators will likely continue to favor floating production systems as field development solutions. Brazilian waters will be the most active region for future floating production projects, with 50 potential floater projects in the planning cycle, according to a recent report by International Maritime Associates Inc. Of the 50 potential projects, 26 are planned for ultra-deepwater, or water depths greater than 4,921 feet; five are planned for deepwater, or water depths between 3,280 feet and 4,921 feet, and 19 for water depths less than 3,280 feet.

Keppel Shipyard is on track to complete the modification and upgrade of FPSO OSX-1, the first floating production storage and offloading FPSO unit for OSX Brazil S.A. Chartered to OGX Petroleo e Gas Participacoes S.A., the FPSO will be deployed in the Waimea field in the Campos Basin offshore Brazil. The FPSO is expected to leave Keppel in this year's third quarter; production is expected to begin in this year's last quarter at a rate of up to 20,000 b/d from the OGX-26 well.

OGX in June unveiled its business plan related to discoveries in the Campos and Parnaibas basins. Waimea and the Waikiki production is expected to begin in the fourth quarter of 2013. In 2013, the company expects to have three Floating Production Storage Offloading FPSOs (OSX-1, OSX-2 and OSX-3) and two Wellhead Platforms "WHPs" (WHP-1 and WHP-2) in place with a total of ten horizontal production wells onstream in these two projects. OGX expects to achieve 150,000 b/d of production from the Campos Basin in 2013 in these two production complexes from 10 horizontal wells producing an average of 15,000 b/d each.

The gas production ramp-up in the Parnaíba Basin is expected to begin in the second half of 2012. OGX has one project covering two accumulations in the PN-T-68 block, which is 46.7% owned by OGX, and is expected to achieve gross production of 5.7 million m3 of natural gas per day (approximately 200 MMcf/d), or approximately 36,000 BOE/d in 2013 (approximately 15,000 BOE/d net to OGX).

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Analysis: Latin America Rig Activity Grows

- Analysis: Latin America Rig Activity Grows

Friday, June 17, 2011
Rigzone Staff
by Karen Boman

Latin America oil and gas activity is booming, with year-on-year rig activity increases from April 2010 to April 2011 in Argentina, Brazil, Colombia, Ecuador and Venezuela, according to a recent report by London-based Evaluate Energy.

The five countries have experienced at least a 15 percent increase in active rigs from the April 2010 count. In Brazil, the average number of rigs grew from 85 in April 2010 to 108 in April 2011, and in Venezuela, the average number of rigs grew from 88 in April 2010 to 110 in April 2011. However, Colombia has leapfrogged the pair within two years to become the second most active country on the continent behind Mexico, with the average number of rigs growing from 79 in April 2010 to 111 in April 2011.

Ecuador has seen its rig activity increase from an average 18 rigs in April 2010 to 24 rigs in April 2011, but rig activity remains relatively low. Argentina has experienced significant growth, with the average number of rigs in April of this year at 91 compared with 78 in April 2010, but that growth was far less dramatic than the previous year, when the average number of rigs grew from 52 in April 2009.

Further increases in rig activity may be seen in the future thanks to YPF's discovery of an estimated 150 million barrels of shale oil in Argentina's Neuquen province, continued drilling activity in Brazil's highly productive pre-salt reserves and the finalization of contracts for Colombia's 2010 licensing round.

Mexico was the only Latin American country to experience a decline in rig activity since April 2010. Though it remains the country with the highest number of active rigs in the region, the level has fallen significantly since its own boom in mid-2009.

To address the decline in rig activity and production levels, Mexico's government has changed its energy policy, and state energy company Pemex recently reported it would seek to increase foreign investment in the nation's oil industry and increase focus on exploration in areas such as the Mexican portion of the Gulf of Mexico.

"Overall, the present and future of Latin America are both looking promising. If the new discoveries in Argentina, Brazil and Colombia eventually bear fruit, and Mexico's policy changes have the desired affect, the global oil and gas industry could look extremely different in the near future," Evaluate said.

Colombia's Heavy Oil Plays

Opportunities in Colombia's heavy oil plays, primarily in southeastern Colombia in the heavy oil belt in the Llanos Basin, continue to expand in both developed and underexplored areas, IHS noted in the IHS Herold 2011 Regional Resource Assessment: Opportunities in Colombia's Heavy Oil Play Continue to Grow.

The two most attractive areas in the Colombia oil play for investors and companies seeking acquisitions are the Llanos basin southwest of the Rubiales oil field, and in the Putumayo basin around the developing Capella oil field, said Donald McIvor, senior energy financial analyst and author of the report.

The two largest Colombian heavy oil discoveries to date are the Rubiales field, with 4.38 billion barrels of oil in place, and the Capella field, with 2.2 billion barrels of oil in place. "We also believe two other very large areas — the eastern Llanos basin and the Putumayo basin southwest of the Capella field — have potential for heavy oil discoveries," McIvor said, "but the license holders are doing very little to evaluate them."

Since 2008, the proven and probable reserves of the Rubiales field and four satellites have increased nearly three fold. Additionally, significant discoveries southwest of the Rubiales field have been made in the past 18 months, and the possibility exists that a very large part of the Llanos basin east and northeast of Rubiales is prospective for heavy oil. A large, heavy oil field in the Putumayo Basin is under development by Sinochem Group and Canacol Energy, and numerous discovery opportunities exist around that field and between it and the Andes Mountains, McIvor said.

While production has grown in recent years due to increased investment in secondary oil recovery oil fields, there has not been a big, new discovery recently, said Georgia Cooper, area coordinator for Colombia and Mexico in the Global E&P Reporting Service at IHS. Additionally, the Colombia government must address some key issues, particularly around infrastructure and transportation, to facilitate growth in oil and gas investment. Steps being taken to improve infrastructure include the approval by Ecopetrol's board of a US $3.39 billion modernization project for the Barrancabermeja refinery, which is expected to be completed in 2016.

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