Brazil gears up for new wave of offshore activity - 1

Brazil's National Petroleum Agency has finally outlined the process for the 11th round of bidding for 166 of the country's offshore oil blocks to be held in May 2013, five years after the previous round went under the hammer. Beset by delays and uncertainty, chief amongst which being the ongoing debate surrounding the destination of royalties from the oil production, the auction will provide a timely boost for the industry just ahead of the presalt blocks, set for a first auction in November pending governmental approval.

Of the total 289 blocks comprising the 11th round, 166 are offshore and 81 lie in deepwater locations. The agency's seismic data suggests there are up to 7.5 Bbbl of oil to be tapped in the round, and 71 companies from 18 countries had registered to take part by the ANP's deadline at the start of April.

Difficult times

The latest figures for Brazilian oil and gas production underline what has been a difficult 12 months for the industry, with Petrobras announcing a 36% drop in profits in 2012 compared with the year before and production down 2%. Company President Maria de Graças Foster told investors that 2013 would "also be a difficult year for oil production" and that "it will only begin to increase in the second semester of 2013 with the six new platforms which will begin working through the year."

The company continues to be responsible for 94% of all oil produced in Brazil, of which 91% comes from its offshore wells. Foster announced a 2013-2017 investment plan that maintains spending levels rather than offering any sign of industry-boosting increases, promising $237 billion over the next five years, two-thirds of which will be dedicated to exploration and production.

Meeting high production targets remains one of her biggest challenges, and getting the state oil giant's 11 new units onstream by 2015 is the priority, from which point the company is confident it will start generating more cash than spending. The plans prompted an optimistic appraisal of the presalt prospects from Foster, who predicted that production levels in the Santos and Campos basins would reach 1 MMboe/d by as early as 2017.

Presalt potential

Petrobras broke the 300,000 boe/d mark in the presalt layers of the Santos and Campos basins on Feb. 20, seven years after the huge reserves were first discovered. While average daily production remains nearer the 281,000 boe/d mark, the achievement underlines the potential over the coming years. Drawn from just 17 wells, production will receive another boost when FPSO Cidade de Paraty, with a capacaity of 120,000 boe/d and currently undergoing a refit in Angra dos Reis, is installed in the Lula field of the Santos basin later this month. The FPSOs Cidade de Ilhabela and Cidade da Mangaritba are undergoing conversion in China and are expected to hit production of first oil in the last trimester of 2014, the former in Sapinhoá field, the latter in Iracema Sul.

Upcoming campaigns

The Dutch company SBM Offshore reached agreement with Petrobras for the 20-year charter and operation of two further FPSOs in a contract worth around $3.5 billion. The Lula field, where they are destined to go into production in 2015, is 186 mi (300 km) offshore Rio de Janeiro, and has some of the largest reserves of oil in the world.

Following the signing of a $700-million deal with Ocean Rig for the Mylos drillship at the end of 2012, Repsol are expecting delivery in the second half of the year as its construction nears completion in South Korea. Mylos's destination is the Pão de Açucar field, part of the BM-C-33 block Repsol operates on behalf of Statoil (35%) and Petrobras (30%), drilled in 2,800 m (9,186 ft) of water, 195 km (121 mi) off the Brazil coast with estimated resources of 700 MMbbl of light crude.

BP has completed flow tests at the Itaipu-1A well in the Campos basin, 125 km (77.6 mi) off the coast of Rio de Janeiro. The resulting flow of up to 5,600 boe/d was, according to BP Brazil's Vice President for Exploration Neil Piggot, "a good result…indicating that commercially viable flow rates can be achieved." BP is the operator of the block with 40%, while Anadarko Petroleum holds a 33.3% stake and Maersk Energia has a 26.7% share. A new appraisal well, Itaipu-3, has been agreed with the ANP and BP will begin operations there later this year.

Following the ANP announcement on March 12 to hold the bid round on May 14-15, the president of BG Brazil, Nelson Silva, confirmed the company will be looking at operating in new blocks, rather than acting as partners. The company was buoyed by positive results from the company's BMS-9 and BMS-11 blocks in the Santos basin that were, Silva noted, "better than had been anticipated."