DESPITE global economic turmoil, especially in Europe, Brazil’s petroleum industry is on a roll and set to remain a net oil exporter this year by volume, according to Jose Sergio Gabrielli, CEO of semi state-owned Petrobras.
However, he said at the Downstream Asia conference on November 1 that 2012 was less clear owing to a leap in gasoline imports during the current year due to strong domestic demand and a shortage of locally manufactured sugar-cane ethanol.
Despite such pressures, the Gabrielli ambition is to turn Brazil into a major oil exporter, perhaps some 600,000 barrels a day by 2020.
Petrobras, whose reserves base stood at 15billion barrels oil equivalent at the end of 2010, expects to boost crude output to 3.9million barrels per day by 2015 and 4.9million bpd by 2020 compared with 2.1million bpd today.
“We are forecasting to become a very big net exporter by 2020, not only of oil products but also of crude,” Gabrielli told the Singapore International Energy Week conference. He said too that Petrobras doesn’t currently need to raise funds given its strong cash position, currently around $26billion.
Nor has market volatility impacted the company’s ability to carry out its planned $13.6 billion divestment programme, which includes sales of oil exploration and production assets, and shares in companies not deemed part of its core business.
“We don’t think that we will have any problems selling these, given the current conditions in the market,” he said.
This is the backdrop to the most ambitious offshore exploration and development programme ever attempted.
As much as $1trillion is to be invested offshore Brazil, with at least $225billion earmarked for ploughing largely into the Brazilian supply chain alone over the current five-year plan. It is this staggering ambition, coupled with progress over the past several years that a few weeks ago earned Gabrielli a top accolade at this year’s Oil and Money Conference in London. He received the Energy Intelligence Group’s Executive of the Year Award. The citation particularly noted the following achievements:
Start-up of the pre-salt Lula oil discovery in the Santos Basin;
The world’s largest ever IPO (initial public offering) where Petrobras successfully raised $70.7billion
The signing of the Transfer of Rights with the Brazilian government that guarantees the company the right to produce five billion barrels of oil in pre-salt areas not yet offered for bid.
Petrobras is a hugely successful explorer. Over the five years to 2010, some 34billion barrels of oil were discovered worldwide of which 51% are considered deep and ultra-deepwater. And 62% of these deepwater finds are located offshore Brazil. Over the past decade, Petrobras discovered seven of the ten largest oilfields located anywhere . . . mostly pre-salt. And it is pre-salt that represents the key to the ultra-bold Gabrielli vision.
The company’s pre-salt hunt began with the Tupi discovery of 2007 in the Santos basin 250km (160 miles) off Rio de Janeiro. The giant reservoir is located at a depth of 5,455m (18,000ft) under a 1,800m (6,000ft) barrier of salt, since when a string of major finds have been made, such as Guara and Iara.
The latest find has been made in the newly-opened Segipe-Alagoas Basin on Block SEAL-M-426. The 1-BRSA-851-SES (1-SES-158) well, known as Barra and drilled in 2,341m (7,725ft) is already seen as a major prize in its own right.
Estimates for the total pre-salt resources vary. Some analysts place total extent of pre-salt recoverable oil and natural gas reserves at more than 50billion barrels oil equivalent.
It was in December 2010 that Petrobras submitted a declaration of commerciality to the Brazilian government agency ANP for the Tupi and Iracema fields, which renamed them Lula and Cernambi, respectively. The total recoverable reserve estimate for these fields is 8.3billion barrels of oil equivalent (boe) (6.5billion boe for Tupi and 1.8 billion for Iracema).
Petrobras plans to develop its major pre-salt assets in three discrete phases: extended well tests, pilot projects, then large-scale production through multiple, duplicate floating production, storage, and offloading (FPSO) facilities. By taking this approach, the company will minimize financial risk while getting early production.
It is pre-salt above all that has propelled Petrobras up the rankings to third largest oil company by market capitalisation and 34th in the overall global corporate league table.
Such is the impact of pre-salt that the Brazilian government has remodeled its regulatory structure to take account of the different nature of this emerging play.
IN ITS 2011-2015 business plan, Petrobras calls for a total investment of $224.7billion of which 95% will be invested within Brazil.
And of the headline figure, $127billion . . . or 57% . . . of the total will be invested in E&P (exploration and production) activities.
Overall, pipelines and related infrastructure will swallow $20billion and a similar investment will be made in exploration. Production development is expected to consume $77billion.
Despite pre-salt capturing the headlines, the hugely successful, post-salt Campos basin will remain a major source of production.
The amount of equipment installed in the Campos tells its own story. More than 836 Christmas trees and over 70 manifolds have been installed. Also, more than 7,000km of flexible lines and umbilicals are in use today. And at the heart of that infrastructure is a flotilla of 40 floating production units … primarily converted tankers (FPSOs). They make the majority contribution to the company’s current 2.3million bpd output.
Doubling production will be based around 19 projects, a number of which will involve multiple FPSOs.
Is such a pace possible? A measure is that, over the last seven years, Petrobras has planned 35 floating production units and has a number of these in-build, fitting out or commissioning.
Speaking at an Offshore Europe 2011 breakfast, Petrobras senior manager Tuerte Amaral Rolim said: “This is an important achievement, and that is why we are very confident that we will surpass the target for the next seven years.
“For example, in the pre-salt area of the Santos Basin there are currently three FPSOs in operation for pilot and extended production tests proposed. We are producing around 50,000bpd from the pre-salt at this moment.
“Petrobras has been able to grow production at an annual average of 5% for a number of years. But in order to accomplish this production target as defined in our strategic plans we have to reach the rate of 9% per year.”
Petrobras has reorganised to cope, including setting up two new “executive structures”. “One unit is responsible for project conception and implementation. Another one is dedicated to offshore well construction,” he said.
“It is very important to remember that we proceeded in a similar way when we discovered the Campos Basin.
“Between 2015 and 2020, we are planning to install about 35 new systems. It’s a huge growth but feasible. It is this portfolio that will support today’s business plan. Over the next five years, Petrobras forecasts the entry of 18 production development projects . . . nine pre-salt; nine post-salts; and 19 expanded well test.”
The major projects . . . pre- and post-salt . . . are concentrated in three basins . . . Campos, Santos and Espirito Santos. The first phase of the pre-salt planning involves the design and build of eight near identical (replicated) FPSOs. The base design was developed by Petrobras. The production facilities of each vessel are to be grouped in 16 modules.
“It’s a huge production system involving considerable contaminant removal capability, mainly CO2,” said Rolim.
He admitted in Aberdeen that the sheer scale of the Petrobras ambition is more than the current indigenous supply chain can handle, which means that there will be a greater need to import foreign equipment than the company and the Brazilian government would normally be comfortable with.
However, this does not mean that Brazil is getting soft. The Brazilian regulatory authority, ANP has made it clear that local content must be increased at all practical speed.
There are particular gaps in the Brazilian supply chain that Rolim sees the need for significant foreign contribution, especially risers and pipelines for subsea applications where the demand is likely to be huge. Indeed he foresees a “bottleneck” in this regard. And then there are the marine industries . . . rigs, their drilling systems and support vessels.
Rolim: “We have 39 deepwater rigs contracted and 28 more to be built in Brazil by 2020. Currently our fleet of suppliers and special vessels is around 290 units. We expect to double this number by 2020.
“We need many more production platforms. To date they are 44 units in operation and we are planning to have 94 by 2020. It means 50 more platforms. This is a great opportunity for the marine industry including construction, maintenance and inspection of the fleet
“The equipment demand for drilling and production units represents a unique opportunity too.
“Examples: we’re going to have a need for more than 800 (gas) turbines to be installed for the new production systems; compressors . . . there will be a need for more than 400; Christmas trees . . . around 400; flexible lines . . . more than 2,800km; power generators . . . around 600 and so-on.”
And that’s just the start.