Deep future


From the bottom of the sea – to be more precise, the depths of the pre-salt layers – a truth emerges: Brazil, in the second decade of the 21st century, is presenting itself as one of the main El Dorados for oil and gas sector investments. Between 2000 and 2010, Brazil’s proven oil and natural gas reserves increased 68.5%, according to data from the National Petroleum, Natural Gas and Biofuels Agency (ANP), going from 9.854 billion barrels of oil equivalent (boe) to 16.609 billion. In the last decade, Brazil also took over the global leadership position in terms of discoveries of new reserves, according to a survey by the international consulting firm IHS Cera. Taking into account the volume and number of wells with more than 1 billion barrels, 11 of the 35 biggest discoveries around the globe were made in Brazil — which even surpassed Middle Eastern nations traditionally recognized as having the largest reservoirs on the planet.

“The pre-salt is a turning point for Brazil. It has the potential to become a great  competitive advantage in terms of additional reserves and for future growth. In many aspects, the stars are in alignment on behalf of the country, and it is clear that this also is the case for Petrobras. Based on the company’s success, Brazil is ready to strengthen its position as the leader of deep-water technology and to become an important oil exporter,” says John Robinson West, founder and CEO of the respected PFC Energy consulting company.

In a context in which the main world oil companies are finding it difficult  to make new discoveries, the pre-salt areas in Brazil are moving in the opposite direction. According to ANP data, the number of hydrocarbon shows reported by the oil companies working in the country totaled 960 during the past decade. Just between 2005 and 2010 these reports doubled: they went from 75 to 149 per year. Although many of them do not necessarily pan out to be commercially feasible reserves, the speeding up of the pace of the findings is a good indication of the heating up of the sector.

Although Brazil is still distant from the Arab countries, it appears the country is heading quickly toward the top positions. Such optimism is justified when one takes into account the fact that most of the pre-salt discoveries have not yet been calculated into the current proven reserves. The total volume estimated, just in the Libra and Franco fields alone, may reach 13 billion barrels, according to the assessment of the Gaffney, Cline & Associates certification agency that was contracted by the ANP to evaluate the pre-salt accumulations — practically the same amount that Petrobras discovered in the
areas that also had been put out for tender by the federal government.

The largest oil reserve ever discovered in Brazil until today, the Libra prospect could contain between 3.7 billion to 15 billion barrels, with a total of 7.9 billion being most probable. Other discoveries still being tested by Petrobras, such as the Lula and Cernambi areas (estimated at 5 to 8 billion barrels), Iara (estimated at 3 to 4 billion) and Guará (estimated at 1 to 2 billion), as well as other pre-salt fields located in the Campos Basin (with estimates between 1 and 2 billion), until now have only had small portions
included in the officially recognized Brazilian proven reserves.

“I believe that Brazil will play an increasingly important role in the global energy market. Based on our numbers, we can say that it will be the third most important country in terms of growth of supply through 2035, behind only Saudi Arabia and Iraq,” says Fatih Birol, chief economist of the International Energy Agency (IEA),  corroborating West’s statements.

The Brazilian potential for oil and natural gas, however, is not restricted to the pre-salt regions of the Santos and Campos Basins. The Multi-Annual Geological and Geophysical Plan prepared by the ANP presents other exploration frontiers. “One of the areas with the greatest potential is the so-called Equatorial Margin, which runs from the Potiguar Basin in Rio Grande do Norte up to the headwaters of the Amazon River, a region that is analogous to the African West Coast and where major oil discoveries were recently announced. The Brazilian Equatorial basins could present a potential that is similar or even greater than those of the African basin,” says Haroldo Lima, director general of the ANP.

Where is the pre-salt?
The term “pre-salt” refers to a cluster of rocks that can be found in several points along the Brazilian coast, with the potential for generation and accumulation of oil. It’s called pre-salt because of a range of rocks that extends beneath an extensive salt layer, which in some areas can reach a thickness up to 2,000 meters. The distance between the sea surface and the oil reservoirs below the salt layer can reach more than 7,000 meters. The biggest oil findings made in Brazil by Petrobras in the pre-salt were located on the coast between the states of Santa Catarina and Espírito Santo, at a distance of about 300
kilometers offshore.

What is the potential of the pre-salt?
The pre-salt could transform Brazil into a world leading producer of oil and natural gas. Petrobras has plans to produce 3.95 million barrels of oil per day in Brazil in 2020, with 1.078 million barrels coming from the pre-salt.

Heating up the market

It is impossible to disassociate the heating up of the Brazilian energy market from  Petrobras’ activities; the company has signifi cantly boosted its investments in exploration, production and development of technology in the past few years.In 2010, its production of oil and gás increased 2.3% over 2009, reaching 2.583 million barrels of oil equivalent per day in its operations in Brazil and abroad.

presal2The good results are even better when associated with the increase in Petrobras’ proven oil, condensate and natural gas reserves, which in 2010 totaled 15.986 billion barrels (according to SPE’s criteria), up 7.5% over the previous year. Of the total, 96% is located in Brazil. Over the same amount of time, the Reserve Replacement Index, which is an important market indicator, increased 229%, whereas the reserve/production ratio closed the year at 18.4 years.

At the end of last year, Petrobras declared the commercial feasibility of good quality oil and gas in the lula and Cernambi fields, both located in the Santos Basin pre-salt layers. In the former, the recoverable amount reported to the National Petroleum Agency (ANP) was 6.5 billion barrels of oil equivalent (boe), at API 28. In the latter, the volume was 1.8 billion barrels at API 30.

“Other traditional producing areas in the country also have reported increases. Today, very few companies have a reserve replacement level similar to that of Petrobras,” emphasizes Carlos Eugênio da Resurreição, general manager of the company’s Reserves and Reservoirs area. “In 2010, for each barrel of oil equivalent extracted in Brazil, 2.40 barrels of oil equivalent were appropriated, resulting in a Reserve Replacement Index of 240%. We are working to incorporate reserves that compensate production, which increases the total recovery factor, which today is at 31%,” he argues.

Birol sums it up: “Petrobras can be proud of its reputation for sophistication in deep-water operations and has become a global leader in this field. The company already is one of the largest oil companies in the world, but it is probable that it will play an even bigger role in the future.”

More investments coming

At the end of last year, the Brazilian government sanctioned a new regulatory framework for exploration in the pre-salt layers, establishing a reduction sharing  mechanism. The law approved by the National Congress also determined that Petrobras would be the single operator of the blocks, with a minimum participation of 30% in the consortia that were established. Now capitalized like never before through a public share offer — the company conducted the largest capital increase the world had ever seen, obtaining R$ 120 billion through the issue of more than 4 billion shares —  Petrobras currently is executing its 2010-2014 Business Plan that calls for investments totaling some US$ 224 billion.

There was a quick response to the share issue operation. At the beginning of the year, Petrobras jumped to third place on the PFC Energy 50 list of the largest companies in the industry by market cap, published by the U.S. energy consulting company. Assessed at US$ 228.9 billion, Petrobras is behind only ExxonMobil (USA) and PetroChina (China). In its analysis of this ranking, PFC Energy emphasized the continuous growth of the Brazilian company, which went from 27th position in 1999, the year of the fi rst edition of the list, up to its current placement.

“The growing importance of Petrobras is comparable to the increasing political and economic infl uence of the emerging countries. We live in a multi-polar world, where  the role of countries like Brazil will continue to expand,” said West, of PFC Energy. “The company certainly will become one of the main enterprises of the industry by 2015. It is taking all the correct steps in the direction of growth.”

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