Recent Huge Gas Discovery by Petrobras Could be Gamechanger for Brazil

By Richard Mann, Contributing Reporter

RIO DE JANEIRO, BRAZIL – Brazilian oil and gas giant Petrobras just made its biggest discovery in Sergipe since pre-salt, in 2006. From six fields, it expects to extract 20 million cubic meters (m³) of natural gas per day, the equivalent of one-third of Brazil’s total production.

Published last month, the discovery is expected to generate R$7 (US$1.8) billion in annual revenue for the state-owned company and its partners, the Gas Energy consultancy estimates.

According to the government’s announcement, this may help achieve the expected “cheap energy shock” promised by Economy Minister Paulo Guedes – a plan to reduce the cost of natural gas by up to 50 percent and “reindustrialize” Brazil.

The government believes that, within a short time, Sergipe should produce the cheapest gas in Brazil. First, by increasing output, which in itself helps to reduce costs. Second, by competition from the company’s rivals, such as ExxonMobil, which has exploration projects in the region. Last, by the activities of gas importers, which will also be competing for the outflow infrastructure. As a result, the trend is to reduce the transport charges and thus the final price of the product.

The government also expects to stimulate the region’s economy. From 2014 to 2017, the oil and gas network was virtually paralyzed as a result of the sharp drop in the price of inputs in the international market and the findings of Operation Lava Jato, which uncovered billions in misappropriations at Petrobras.

The director of the National Petroleum, Natural Gas and Biofuels Agency (ANP), Felipe Kury, classifies the potential of the Sergipe-Alagoas Basin as “very promising”.

In addition to the six Petrobras fields, ANP believes that there are other areas in the region with indications of the existence of oil and gas that, in the coming years, may result in important new discoveries.

According to data from the Ministry of Mines and Energy (MME), to design storage tanks and build a gas pipeline up to the coast, Petrobras should spend US$2 billion this year. The state does not disclose plans for the region. Through its consultancy, it reported only that “the deep waters of Sergipe have shown great potential for development.”

Also, it said that the project budget is included in its strategic plan for the next five years. For the time being, the state-owned company is working only on exploration, but not on the production from the fields.

With Petrobras’ success in the exploration of six storage tanks and the coming of private investors, Sergipe was included in the national natural gas network. In five years, the State alone must move 40 million m³ of gas per day, a volume corresponding to more than four times the current consumption capacity of the entire Northeast region.