New discoveries change direction of investment
Significant light oil discoveries in the last two years, including a major one in the Golfinho field announced in January, are changing Brazil’s reserves profile. State-owned Petróleo Brasileiro SA forecasts that the current profile of reserves and production, mainly heavy crude, is starting to change to lighter oil, natural gas, and condensates, which have more economic value.
This year, Petrobras will concentrate on evaluating projects based on discoveries made in 2003, especially in the Espírito Santo basin, where there are strong indications of a new producing province of light and ultra-light oil.
Petrobras plans to hike investments in the southeastern state of Espírito Santo, from the $537 million in 2004 to $994 million in 2005, to develop oil and gas production projects. With the expectation that 50% of the new reserves offshore Espírito Santo basin will be light crude, Petrobras is investing $6 billion in the state through 2010.
Oil production from Espírito Santo basin has undergone an exponential increase, from 9,000 b/d in 1998 to 32,000 b/d in 2004. Petrobras expects production to reach 190,000 b/d by May 2006 when an FPSO begins production at 100,000 b/d in the Golfinho field.
According to Petrobras, the average light oil production in Brazil breaks down as follows:
* 108,960 b/d in 2001
* 105,921 b/d in 2002
* 103,654 b/d in 2003
* 104,840 b/d in 2004.
Proven light oil (> 30° API) reserves equal 1.32 Bbbl, equivalent to 12% of the nation’s 11.05 Bbbl in reserves.
“The perspective of change of the production profile from heavy crude to light oil in the future is very important for Petrobras because we import light oil, mainly from Nigeria, to blend with heavy crude in our refineries and improve the quality of oil products,” says Guilherme Estrella, Petrobras’ exploration and production director.
Until recently, Petrobras produced very little light oil. “Last year, oil production with more than 30° API was less than 10% of Petrobras’ total production, which averaged 1.5 MMb/d. We only produced some 50,000 b/d in the Amazon basin. The light oil produced in the Roncador field in Campos basin ranging from 28° API to 31° API, is insignificant, and in the Recôncavo basin, Bahia state, the fields are mature, and production is declining,” Estrella says.
According to Petrobras, light oil production comes from 74 onshore fields, 11 offshore fields, and two fields that are both onshore and offshore. Four of the onshore fields are in the oil province of the northeastern Alagoas state, with production of 37.4° API oil. Three more onshore fields in the Urucu area of Amazon state produce 48.5° API crude. There are 65 onshore fields in Bahia state as well as one offshore field and two onshore/offshore fields that produce 36.5° API oil. Nine fields lie offshore Sergipe state and produce 43.7° API crude. The remaining three offshore fields are in the Santos basin, where Petrobras places Merluza field condensate at 43.7° API and Coral field production at 39.5° API.
Golfinho field
On Jan. 5, Petrobras found the existence of sandy rock reservoir formations about 90 m thick, saturated with excellent quality light oil in a well drilled at the Golfinho field delimitation area. The well is 65 km off the coast of Espírito Santo state 12 km from the 1-ESS-123 well in block BES-3, which was responsible for the Golfinho field find.
Petrobras drilled the 3-ESS-156A well as part of the delimitation process of the discoveries in the former BES-100 block (bid zero, in 1998, the first of the ANP licensing rounds), in the Espírito Santo basin.
“The discovery in BES-100 is important because for the first time we discovered very light oil (40° API) in a new geological situation, different from the other light oils that we have discovered, different from Roncador, Campos basin, where the oil is light, but not ultra-light,” says Estrella.
The 3-ESS-156A well, at 1,322-m water depth, reached 3,402-m final depth. Drilling detected major thickness of sandy rock formations with excellent traces of oil and natural gas. The well is under final evaluation. Test results will determine the formation’s productivity and will generate more precise estimates of recoverable reserves.
This well is important because of the substantial thickness of the discovered reservoirs and the existence of light good quality oil, factors that could result in increased recoverable volumes from the area. Petrobras will issue an international tender to contract an FPSO with 100,000 b/d of oil and 2,500 cm/d of gas production capacity to produce the field. Under Petrobras’ business plan, Golfinho will begin production in 2006.
“Other areas that shows geological structures which indicate the possible occurrence of more accumulations in Espírito Santo basin were offered during the sixth licensing round last year, when Petrobras acquired all the blocks, alone or in partnership with private companies,” Estrella says. Repsol YPF, Royal Dutch/Shell, Kerr-McGee Corp., and Canada’s EnCana Corp. partnered with Petrobras on some of the bids.
According to Estrella, reserves across the blocks will vary from 28° to 40° API. This could be considered important in Brazil’s oil production profile, Estrella says, in part because of the large extension of the area.
The development project for the first accumulation, discovered in BES-3 in the Golfinho field, is a complete project because it involves not only the production of oil, but also a large quantity of associated gas.
“Last year, Petrobras decided to anticipate this production by contracting an FPSO, and since the gas will not be flared, we will build a gas pipeline to a location onshore, called Cacimbas, where we operate a gas treatment and processing plant being used for the whole Espírito Santo basin’s gas production. Eventually, we may place other vessels in the Golfinho area because if we are able to produce from 200,000 b/d to 300,000 b/d of light oil in Golfinho, it will become a major factor to change the profile of light oil production,” Estrella explains.
According to Estrella, Cacimbas is being expanded to receive the production of the Peroá field and Cangoá field (producer of non-associated gas) in the first months of this year. In mid 2006, it will also process associated gas from Golfinho, which should amount to 2-2.5 MMcm/d.
Piranema field
In Estrella’s opinion, the deepwater Piranema field in the Sergipe-Alagoas basin off Sergipe state constitutes another important light oil discovery. The field is 37 km from Aracaju, the capital of Sergipe. Discoveries of light oil occurred in wells 1-SES-147 and 1-SES-149 in the SEAL-100 block. Petrobras estimates that the accumulations contain around 150 MMboe.
“From the exploratory point of view, this discovery is important because for the first time we found ultra-light oil (40° API). Although we do not expect high levels of production - our forecast is 10,000-20,000 b/d - the existence of these accumulations of light oil increases the exploratory value of adjacent blocks that Petrobras acquired during the sixth round,” Estrella says.
Petrobras signed an MOU with Sevan Marine do Brasil Ltda., a Norwegian subsidiary of Sevan Marine, to develop the Piranema field using the FPSOSevan SSP300 through a long-term contract. The FPSO will be ready to come onstream in mid 2006. The oil to be produced is at 1,000-1,600 m water depth, and the platform will process 15,000 b/d of oil. The Sevan SSP300 is a unique cylindrical mono column that will operate for the first time on the Piranema field, Petrobras says.
Petrobras also discovered 435 MMbbl of excellent quality light oil in 2003 in the BS-500 block in the offshore Santos basin.
Brazil triples gas reserves
Brazil saw excellent discoveries of natural gas and condensate in blocks BS-500, BS-400, and BS-1 that changed the scale of volumes of the Brazilian natural gas reserves in 2003. The 419 bcm of gas, discovered in blocks BS-400 and BS-500, tripled Brazil’s gas reserves.
“This discovery represents a major turning point in Brazil’s gas market and could have the capacity to produce around 55 MMcm/d of gas for a 20-year period, surpassing Petrobras’ current 46.2 MMcm/d total production,” says Ildo Sauer, Petrobras’s gas and energy director.
Tests run on the natural gas discovery well 1-RJS-587 in the BS-500 block showed a production capacity greater than 10 MMcm/d, with recoverable volumes of 110 bcm of gas and condensates.
Another important gas discovery took place in the BS-400 block with well 4-SPS-35, which indicated a production capacity of 2.5 MMcm/d after testing, with recoverable volumes estimated at 130 bcm of gas and condensates.
Other gas discoveries in the BS-400 block include wells 1-SPS-37A and 1-SPS-36A, which need to be better evaluated for a complete definition, Sauer says.
The development program of these discoveries might not rely on FPSOs. The company is considering a subsea pipeline network that would take gas directly to an onshore treatment unit probably at its existing São Sebastião terminal in São Paulo state.
Petrobras is still appraising the deepwater Mexilhão natural gas field, also in the Santos basin. Non-conclusive studies point to 85 bcm of gas. The field is in the BS-400 block, 130 km from shore. Mexilhão’s appraisal is expected to be concluded by the end of 2006.
Petrobras plans to invest $1.5 billion to develop the Mexilhão field by 2008. The company’s original plan was for production to start in 2009. However, the project could be accelerated by the country’s plan to increase gas usage from 2007 onward, when 4,000 km of new gas pipelines are concluded.
El Paso Corp. also discovered natural gas reserves in the Santos basin. The find is in block BS-1, where operator El Paso holds a 60% stake in partnership with Petrobras. The discovery was made through well 1-ELPS-14B-SPS. Recoverable volumes are estimated at 3.2 bcm of natural gas and condensate. The well is 3 km away from the production and outflow facilities of the Merluza field, a condensate producer.
The Santos basin, Brazil’s largest, occupies 352,000 sq km, stretching offshore Santa Catarina, Paraná, São Paulo, and Rio de Janeiro states. The importance of discoveries in the basin is enhanced by the fact that they are off São Paulo state, Brazil’s main consumer market, which is responsible for about 40% of Brazil’s gross domestic product.
