increasingly, companies like Devon and now BP, state-run oil company Petrobras (PETR4.SA)(PBR.N) and upstart rival OGX (OGXP3.SA), are turning their attention to new Campos potential.
The Campos has subsalt oil too. It is not yet clear whether it has the potential that the Santos has shown. But the reduced costs of production in Campos may make up for short comings in scale as well.
BP late to Brazil subsalt party, bets on Campos
Reese Ewing
SAO PAULO
SAO PAULO (Reuters) - BP (BP.L) is one of the last of the oil majors to enter Brazil's subsalt boom, but it may have found some value in Devon's (DVN.N) Campos concessions that it announced it bought on Thursday in a deal worth $7 billion.
While BP has long eyed entry into Brazil, Devon's subsalt assets are, however, in the Campos basin, rather than the Santos basin to the south, where most excitement is focused on the huge 5-8 billion barrel Tupi find in 2007.
The Campos basin accounts for 85 percent of Brazil's nearly 2 million barrel daily output and was responsible for making it oil-independent in 2006. It has until recently produced heavy grade oil with regularity from shallower depths.
But increasingly, companies like Devon and now BP, state-run oil company Petrobras (PETR4.SA)(PBR.N) and upstart rival OGX (OGXP3.SA), are turning their attention to new Campos potential.
The Campos has subsalt oil too. It is not yet clear whether it has the potential that the Santos has shown. But the reduced costs of production in Campos may make up for short comings in scale as well.
"The salt layer in the Campos is only 200 meters (660 feet) thick over some fields when the Santos salt cap is 2 kilometers (1.2 miles) deep," Nelson Rodrigues de Matos, an analyst at Rio de Janeiro investment bank BB Investimentos said.
"A lot of the subsalt oil may have seeped out of the Campos to upper layers but those that are still there will be cheaper to access."
But not all experts agree.
Petrobras' director of exploration Guilherme Estrella, also known as the father of Brazil's subsalt, said recently that the Campos has a "Saudi Arabia lying below it" in the subsalt. Petrobras is already intensifying subsalt drilling there.
The company is cutting costs and time to production by drilling through wells in shallower producing fields into the subsalt layers below.
It has already found more than 2 billion barrels of light subsalt oil underneath existing heavy oil fields and it has started producing by linking the deep subsalt fields to in place platforms, eliminating the need for new platforms.
OGX, the E&P division of conglomerate EBX controlled by billionaire Eike Batista, is laying money on the Campos.
After Batista poached several of Petrobras' top geologists by offering them equity stakes, including OGX Chief Executive Paulo Mendonca, the company has been announcing weekly discoveries in the Campos basin.
CHEAPER, LESS HASSLE
The technical challenges of producing oil commercially from the super-giant Santos subsalt fields have not been tested yet. The light grade oil in the Tupi field lies 300 kilometers from shore, 7 km under the ocean surface -- under 2 km of salt, 3 km of sand and rock and 2 km of water.
Not only does it require huge investments to drill and build the wells, simply getting the oil and gas up and to the market and staffing the platforms is nothing that Petrobras has encountered before and it is pioneer in deep-water production.
"One of the important advantages that should not be underestimated with the Campos subsalt is the existing infrastructure in the basin," Luiz Otavio Nunes, E&P specialist at Agora Senior, said. "It's also shallower, closer to shore."
Soon after Petrobras announced its Tupi find, the Brazilian government halted new tenders for concessions to explore offshore blocks. It is in the midst of trying to rewrite its 1997 Oil Law to channel more of the future revenue from the subsalt reserves into state coffers.
Late comers to exploration in Brazil will have to accept tougher terms if they want subsalt and there is no guarantee that tenders for new blocks will start soon. Legislation is bogged down in Congress during an election year.
But the government has stressed that existing concessions will be honored as is, giving Devon's assets added value if BP wants to boost its reserves sooner rather than later.
"BP's purchase of Devon assets makes good sense when you consider the regulatory uncertainty of bidding for a new block under a yet to be defined regulatory framework," Adriano Pires, former director of Brazil's oil and gas regulator ANP, said. |
