Karoon sees Brazil subsalt fields extending southwest
BY JEFF FICK
RIO DE JANEIRO -- Karoon Gas has found a promising prospect off the coast of Brazil that, if confirmed, could mean the prolific subsalt region extends further southwest and into shallower waters than is currently thought.
The Stingray prospect "could be very significant," with seismic data showing a large geologic structure that could potentially hold billions of barrels of crude oil, said Tim Hosking, Karoon's chief executive of South American operations, in an interview.
Brazil's state-run energy giant Petrobras, has found billions of barrels of crude oil trapped many miles below deep Atlantic waters, seabed and a thick layer of salt. The discoveries, some of the largest in the world in the last 20 years, are mostly off the coast of Sao Paulo state.
Karoon is now looking to test whether this may run further south, off the coast of Santa Catarina state, where waters are much shallower, Mr. Hosking said. Tapping Stingray still involves enormous engineering challenges.
We're looking at drilling, more or less, to 8,000 m, the executive said. That would be a bit deeper than the Santos basin, despite the shallower waters, and only four drilling rigs in the world are capable of tackling such extreme depths, Mr. Hosking said.
Karoon won't even drill the first well at Stingray until 2014 at the earliest, and the company needs to examine more seismic data before making a decision, Mr. Hosking said. Engineering advances made in deep-water drilling currently under way in Brazil and the Gulf of Mexico could help ease some of the challenges, Mr. Hosking said.
Stingray is one of two subsalt prospects under analysis in Karoon's five blocks in the Santos Basin. It lies in about 400 m of water, compared with 2,000 m for fields such as Petrobras's Lula field, he added.
Karoon is meanwhile moving forward with other traditional exploration opportunities. It's planning to drill its first well in Brazil, called Kangaroo-1, in the first two weeks of November, at a cost of between $70 million and $90 million. That will be followed by the Emu-Cassowary prospect in early 2013 and the Bilby prospect likely early in the second quarter 2013, Mr. Hosking said.
It's spending about $250 million on the wells, funded in large part by the sale of a 35% stake in four of the company's five blocks to Pacific Rubiales, Mr. Hosking said. Pacific Rubiales will cover the first $70 million in costs on the first two wells, and has an option to do the same for the third well.
The sale means Karoon has ditched plans to sell shares in a Brazilian unit, Mr. Hosking said. The company had considered an initial public offering of shares in late 2010 but abandoned them amid tough market conditions. An exploration play such as Karoon is a poor fit given current global market turmoil, he added.
In the next six to nine months, Karoon and Petrobras will decide whether the Maruja field, also in the Santos basin, can be commercially viable, Mr. Hosking said. Karoon holds a 20% stake in the field, which is near the Tiro and Sidon fields, which are currently producing 30,000 bopd.
Karoon is keen to expand in Brazil, and will take a close look at the 11th auction of traditional exploration licenses and the first auction of subsalt exploration licenses, Mr. Hosking said. The company has already identified some areas in the northern and northeastern Brazil that are enticing, but will wait to see the data packages released by local regulators before making a decision to participate, he added.
The recent brouhaha involving Chevron and drill rig operator Transocean, which both face criminal and civil lawsuits for a minor oil spill last year, hasn't affected Karoon's outlook for Brazil, Mr. Hosking said. Karoon has an "excellent" relationship with Brazil's National Petroleum Agency and finds the regulator very responsive to the company's questions, he added.
Karoon, which was taken public in Australia in 2004, also doesn't have any plans to tap global debt markets in the near future, Mr. Hosking said. The firm's target areas are Western Australia and the Northern Territory in Australia, the Tumbes and Maranon basins in Peru, and the Santos basin in Brazil.
In Peru, Karoon expects to open a data room to sell a stake in its Andean nation blocks in the first quarter 2013. The company still plans to drill two wells offshore Peru by the fourth quarter 2013 or first quarter 2014, Mr. Hosking said. The company is currently looking at offers for drill rigs to drill the wells.
Meanwhile, results of the Boreas-1 well offshore Australia have been "positive," Mr. Hosking said. Natural gas was discovered and is currently being prepared for testing, with results expected in about three to four weeks, he said.
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