2018 Outlook: Brazil oil and gas production expected to remain steady

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Thursday, January 4, 2018

Brazil's oil and gas industry has another busy year ahead, with three new licensing rounds scheduled and eight new offshore production units coming online. The country will, however, see its exploration and production figures remain stable throughout the year.

The 15th round under the concession regime will be held on March 29. In total, 70 blocks will be auctioned with 49 in the Ceará, Potiguar, Sergipe-Alagoas, Campos and Santos offshore basins, and 21 in the Paraná and Parnaíba onshore basins.

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Scheduled for June 7, the fourth production-sharing round will offer the Saturno, Três Marias, Dois Irmãos, Uirapuru and Itaimbezinho pre-salt areas, all in the Campos and Santos basins off the country's southeastern coast.

The government will in addition auction off onshore areas at the fifth marginal fields tender, the date for which is yet to be defined, besides licenses (onshore and offshore) that have been included in the permanent offering regime.

According to watchdog ANP, there is still great potential for exploration in Brazil, as less than 5% of the sedimentary basin areas have been awarded so far, while the number of wells drilled (approximately 30,000) is quite low compared to certain other countries – half of what Argentina has already drilled and only a fraction of the millions of wells drilled in the US.

Brazil begins 2018 with 290,000m2 of total area licensed, comprising 349 blocks (218 onshore and 131 offshore). The assets are operated by 43 oil companies, mostly state-run Petrobras (107). Shell, Statoil, Total and ExxonMobil.

EXPLORATION

Since 2014 Brazil has seen a sharp decline in exploration as a result of the oil price collapse and the financial and institutional crisis faced by Petrobras, which is at the center of the Lava Jato corruption probe. 

That scenario is not expected to change much in 2018, although Brazil should see a slight uptick in drilling campaigns.  

Among the offshore highlights are the works scheduled to be carried out by Norway's Statoil in the Santos basin's Carcará and Guanxuma prospects in the first quarter of the year, and the possible drilling of a well by Petrobras in the Sagitário discovery.

The Brazilian NOC is also expected to continue its evaluation campaigns in the giant Libra oil and gas pre-salt prospect, while Australia's Karoon plans to resume drilling in its Santos basin assets, where the Echidna discovery is located.

PRODUCTION

Of the eight floating production, storage and offloading (FPSO) systems projected to be installed this year, only one is not earmarked for a Petrobras undertaking: the Petrojarl 1 FPSO, which will produce oil in the Santos basin's Atlanta field, which is operated by Brazil's Queiroz Galvão Exploração e Produção (QGEP).

The remaining platforms with planned startup in 2018 – P-67 (Lula Norte field), P-68 (Berbigão), P-69 (Lula Extremo Sul), P-74 (Búzios 1), P-75 (Búzios 2), P-76 (Búzios 3) and Campos dos Goytacazes (Tartaruga Verde) – should help Petrobras maintain its production at 2.7Mboe/d this year, according to its latest business plan.

This is because the growth associated with new pre-salt fields coming online or existing fields being connected to new wells is being offset by the continuous drop in production from mature fields in the Campos basin.

CONTRACTING

Brazil should have five FPSOs with tender processes concluded or launched in 2018. One will be by Karoon to be installed in its Kangaroo Santos basin field and four others by Petrobras: Búzios 5, whose tender is underway, in addition to the units earmarked for the Marlim 1, Marlim 2, Parque das Baleias and Itapu projects, which are scheduled to produce first oil in 2021 and 2022.

The NOC is also hiring logistics services and subsea systems for its pre-salt projects, such as wet christmas trees (WCT), risers and umbilicals.

Petrobras is also holding tenders for the chartering of offshore support vessels. Since the new contracts are basically designed to replace charter agreements expiring during the year, the company's fleet, currently around 200 vessels, is not expected to grow in 2018.

RIGS

The same is true for the state-run firm's offshore rig fleet, which at present is formed by 29 rigs under contract.

Chevron and Total, on the other hand, are tendering the contracting of additional rigs. In the former case, the equipment will be used to resume exploration in the Frade field in the Campos basin next year. The well drilling and completion services are also being tendered by Chevron.

The French company, in turn, is seeking an offshore rig for campaigns in the Lapa field, in the Santos basin, and/or in its exploration blocks located in the equatorial margin, on Brazil's northern coast. The latter however, are pending environmental licenses. 

With the recent approval of tax incentives for the oil industry, allowing dehired rigs to remain in local waters for up to three years, Brazil may begin to see short-term rig chartering negotiations, which could help heat up the market in the coming years.