BG executive sees Brazil subsalt output matching North Sea peak
BY JEFF FICK
RIO DE JANEIRO -- BG expects Brazil to represent one third of its global crude oil output by 2020, and the oil fields in which it is already participating to produce as much as the entire North Sea at its peak, BG President Nelson Silva said in an interview.
BG expects its share of production from four deep water blocks offshore Brazil to reach 600,000 bopd by 2020, up from 30,000 bopd currently, Mr. Silva said. The four blocks, located in the cluster of ultra deepwater discoveries known as the subsalt, are all operated by Petrobras. BG holds stakes of between 20% and 30% in each block.
We see our blocks together with Petrobras and other partners producing as much as the peak production, or equivalent amount of oil, as the peak production of the North Sea, Mr. Silva said, noting the comparison referred to barrels of oil equivalent, that include crude oil and natural gas. North Sea oil production is estimated to have peaked at 6.4 mbopd in 2000.
Oil fields in the tempestuous North Sea were a major challenge to develop in the last quarter of the 20th century, and the Brazil subsalt fields, which lie many miles beneath deep sea, bedrock and a thick layer of salt, are now the latest frontier for oil exploration and production.
Discoveries of oil and natural gas there are some of the largest in the world in 20 years; the fields BG has stakes in represent only a small part of the subsalt region, with more than two-thirds of the presalt area yet to be explored and under government control.
Brazil will be "by far the most important country in BG Group' s operations by 2020," Mr. Silva said. While declining to give a specific target, Mr. Silva did say BG expects to implement a "multibillion-dollar" investment plan, making it "the biggest foreign investor in Brazil" by the end of the decade. Since arriving in Brazil in 1994, the company has invested $5 billion.
Mr. Silva downplayed the uncertainty surrounding drill-rig operator Transocean, which was banned from operating in Brazil by a local court in late July. Transocean was operating a rig on behalf of Chevron when a drilling accident at the Frade offshore oil field caused an estimated 3,700 bo crude to seep into the Atlantic Ocean from cracks in the seabed.
Transocean continues to operate 10 rigs in Brazil while appealing the ban. Chevron and Transocean face multibillion-dollar lawsuits brought by a Brazilian federal prosecutor.
BG and Petrobras charter between nine and 11 rigs at any time in their blocks, which may at times include a Transocean rig, Mr. Silva said. "We don' t expect any impact, whatever happens," Mr. Silva said.
BG will pay its share of installing 14 floating platforms made out of converted oil tankers, known as FPSOs, at the fields. "But we won' t stop there," Mr. Silva said. The company expects additional platforms will be ordered to produce all of the recoverable oil from the fields.
The first platform is already producing about 100,000 bopd at the Lula field. Two more FPSOs will be installed at the Sapinhoa and Lula Northeast fields by mid-2013, reaching full production of about 240,000 bopd combined in 2014, Mr. Silva said.
Mr. Silva said the government' s decision to proceed with auctions of new oil-exploration licenses in 2013 could lead to more discoveries.
We may be seeing just the start; there may be much, much more coming, Mr. Silva said. "That' s why it' s so exciting to have the new bid rounds." BG is waiting to see the terms for each auction before deciding to participate, he said.
Brazil plans to hold a much-delayed 11th bidding round of oil and natural gas concessions in May, and the first auction of subsalt licenses later in 2013. For either to proceed, Congress must pass legislation distributing royalties among the various levels of the Brazilian government.
Mr. Silva said government efforts to ensure existing contracts won' t be changed by Congress have reassured the oil industry. "This is absolutely key for us to continue supporting our multibillion-dollar investment in the country," Mr. Silva said.
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