Brazil's National Petroleum Agency (ANP) announced the list of exploratory blocks to be put out for bids in 2001, probably in June, in what will be the 3rd Round of E&P Concession Block Bids. The announcement was made on the last day of Rio Oil & Gas Expo 2000 by the Director-General of the agency, David Zylbersztajn.
A total of 53 blocks will be offered in this 3rd Round - 27 and 23 were offered in the first two rounds - but the areas this time average 1,695 sq km, almost 1/4 of what it was in the first round. Of the 53 blocks, 10 are onshore and 43 offshore, most of which again, are concentrated in the Campos, Santos, and Espirito Santo Basins.
Twelve of the offshore blocks are in shallow waters - less than 400 meters - and 31 are in deepwater and ultra-deepwater areas, some extending beyond the 3,000 meter water depth mark. Additional information will be made available in a series of road shows to be held in Perth, Singapore, London, Calgary, and Houston.
Road show
As Brazil's ANP launches into its road show for the Third Round of E&P concession bids, slated for mid-2001, officials say things will be different this time. The first road show was held in Rio de Janeiro last November and attracted more than 200 potential bidders. This strong showing is a testament to the growing interest of the private sector in operating offshore Brazil. Of those attending, reports state that more than half were from outside Brazil. Future presentations are scheduled for Australia, Asia, Europe, and North America.
At the event, Director-General of the ANP David Zylbersztajn, explained that there were 31 deepwater blocks available. This made up the majority of the 53-block total. Twelve of the blocks are in shallow water, while an additional 10 are onshore. For the deepwater blocks, particularly those in water depths greater than 9,843 ft, the exploratory period has been extended from seven to nine years.
Also encouraging was the announcement that the minimum number of wells, which must be drilled on a block during the third stage of exploratory work on a concession, may be reduced from three to two. In addition, it may be possible for an operator to relinquish a block after only one year.
Data packets will be issued this month prior to the formal call for bids in the second quarter of 2001. Other details, such as the amount of bid bonus, royalties, and other elements, will also be clarified at this time. Early reports indicate these are expected to remain unchanged.
To assist and encourage smaller operators new to the process, mostly Brazilian companies, the ANP will lower capital asset requirements, from US$1 million to R$1 million. This discount applies to non-operators bidding on some of the onshore blocks considered relatively easy to develop. To take advantage of the discount, the smaller companies must for a consortia with combined capital assets amount to R$ 6 million.
The strong turnout at this first presentation is the result of improved geological data, such as seismic speculative surveys. Of course, strong oil prices also helped build interest.
Bids well received
The oil and gas market reacted well to the news about the third round of bids for the exploration blocks, which was announced on October 19th by the ANP.
The adoption of smaller blocks, with an average size of 1,695 sq km (compared to 4,895 sq km in the last bidding round) and a larger number of areas (in all, 53, versus 27 for the first round and 23 for the second) appeared to be well received by the majority of attendees, Petrobras officials claimed. Attendees pointed out that they still need to see the seismic data to be able to evaluate the quality of the blocks.
Of the 53 blocks to be auctioned in mid 2001, 10 are on land and 43 are offshore. Twelve are in shallow water less than 400 meters depth, and 31 are in deepwater or ultra-deepwater (more than 3,000 meters). The selected areas are spread among 12 Brazilian basins: Santos 16, Campos 9, Espirito Santo 9, Jequintinhonha 1, Camamu-Almada 2, Sergipe-Alogoas 2, Parana 2, Recôncavo 3, Potiguar 3, Ceará 2, Barreirinhas 1 and Pará-Maranhao 3.
Marginal fields bids
Petrobras has finished preparing the pre-qualification stage for the bids on its 73 marginal fields that are in the States of Rio Grande do Norte, Alogoas, Sergipe, Bahia and Espirito Santo. This first stage was wound up with the qualifying, by the ANP, of the 56 companies considered able to obtain, in the bid, future concession contracts of the areas.
The bid was opened on July 21, 2000 and had 66 companies for pre-qualification. Sixty-five were selected by Petrobras on September 25. Only those that were qualified by ANP remain to continue in the dispute. Of the 56 pre-qualified:
- 17 were qualified as non-operators
- 11 as non-operators who could up-grade to operator if they are able to prove the contraction of qualified people in managing and operating oil and gas fields
- 16 as operators, but exclusively for land
- 12 who could operate in fields on land or offshore.
Petrobras predicts that in the early months of 2001, the sale will be over and the winners of the bid will be made public.
Shell makes heavy oil find in BC-10
Though it may be a non-commercial find, the 1-Shell-1 ESS well, drilled in Block BC-10 in the northern sector of the Campos Basin in Espirito Santo territorial waters is significant. This is the first oil show in the first well drilled by a foreign operator since the opening of the Brazilian oil sector to private companies (foreign and domestic).
The heavy oil, API 15.6 degrees, qualifies as super-heavy grade and is denser than the oil produced in other Brazilian offshore plays, including Roncador and Marlim. The weight of the oil makes it difficult to produce and affects the commercial viability of the strike. There are indications that Shell declined to test the well, although some analysis of the reservoir's flow potential was conducted.
Even though the find is not commercial it may indicate greater potential for the area. In the words of one person close to the project: "The fact that a company finds heavier oil in one area does not necessarily mean it has been defeated." To the contrary, generating rock was encountered in this well and it is possible other parts of the reservoir could contain lighter oil that would be viable to produce.
The well was drilled by operator Shell for a consortium of Shell (35%), Esso (30%), and Petrobras (35%). The Stena Tay, now drilling for Amerada on Block BS-4, drilled the well in September 2000 and is scheduled to return early this year to drill two more wells in the same block.
Next month, the Stena Tay will be sent to Block BS-4 (Santos Basin) also operated by Shell, to drill two more wells before going back to work for the National Petroleum Agency (ANP) on BC-10. Shell has not released the locations of these new wells, but sources say there are as many as 50 locations being considered.
Historically, heavy oil is present in many Campos Basin fields. It is common for wildcat's to strike heavy oil in one part of a field and then make lighter oil discoveries while exploring elsewhere in the same field. This was the case with Roncador, Marlim, and Albacora Leste, which all had 20 degree API crude initially. Although, further exploration revealed an abundance of much lighter oil. In fact, the first indication of oil in the Campos Basin, even before the Garoupa Field discovery in 1974, was a heavy oil prospect near Cabo Frio, discovered in 1972.
The 1-RJS-3 well tested 10.5 degrees API oil, which is ultra-heavy crude and sub-commercial, therefore it was never brought into production. Greater volumes of heavy oil (under 14 degrees API) have been found by Petrobras in the southern portion of the Campos Basin, the most recent was reported to be 13 degrees API oil.
Espírito Santo State Governor José Ignácio Ferreira is watching the Shell discovery very closely. He is hoping for the big strike that would usher in his state as a major oil producer. Unfortunately, this first well in Espirito Santo territorial waters may not do the trick.
Click here to view Names of the pre-qualified with different conditions and the nine non-qualified companies
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