Oil Investment in Brazil Continues

By Amy Skalmusky, Contributing Reporter

RIO DE JANEIRO, BRAZIL – With the recent Libra oil field discovery promising reserves of up to fifteen billion barrels of oil and Sinochem and BP coughing up billions for space in the Campos Basin, there is little doubt that Brazil is the place to be for the upstream oil giants. But the Brazilian oil market is intimidating for newcomers. Industrial tariffs, bureaucracy, a dominant national oil company and tightening regulations on foreign participation can make setting up shop and getting contracts nearly impossible.

Whether through luck or foresight, a number of foreign operators entered the market early on through joint ventures with Petrobras, the national oil company, or by participating in the open bidding for exploration blocks, which began in 1999. Although Petrobras remains the dominant oilfield operator, many foreign companies have managed to establish a presence in Brazil and continue to invest.

Below are some of the companies with stakes in Brazilian oil fields and their plans develop existing sites and delve into the pre-salt:

Repsol: Headquartered in Madrid, Spain, Repsol has the most Brazilian offshore acreage of any private firm, with stakes in 24 blocks. Repsol was Brazil’s third-biggest hydrocarbons producer in 2009, and it holds stakes in blocks in the Campos, Santos and Espírito Santo basins.

According to the Repsol’s 2008-2012 Strategic Plan, the Company considers the pre-salt area of Brazil’s Santos basin one of its ten key projects and has allocated €$500 million (approximately US$693 million) to its exploration.

In October of this year, Repsol announced the sale of 40 percent of its Brazilian assets to China Petrochemical Corp. for US$7.1 billion. The joint venture, valued at $17.8 billion overall, guarantees Repsol the funding to explore the Brazilian fields.

Galp Energia: Headquartered in Portugal, Galp has been active in Brazil since 1999. It has the third-largest acreage offshore Brazil, and holds stakes in the Tupi pre-salt field, in the Santos Basin, where it plans to focus much of its future investments. Its accumulated capital expenditures (CAPEX) in Brazil came to €261 million (approximately US$ 362 million) at the end of 2009.

Galp is shifting investments from refining and marketing to exploration and production. According to Manuel Ferreira de Oliveira, Galp’s Chief Executive Officer, the Company plans to invest US$3 billion over the next few years to develop its Brazilian prospects.

Shell: Royal Dutch Shell, headquartered in The Hague, the Netherlands, started in Brazil in 1913. It was the first private enterprise to start up oil exploration activates in the Campos Basin in 2000. The Company operates 15 onshore and offshore extraction blocks located in the Campos, Santos, Espírito Santo and São Francisco basins. Shell is producing oil at the Bijupira-Salema and Parque das Conchas projects in the Campos Basin. They have spent US$3 billion in Brazil over the past ten years, including US$600 million in 2009.

The Company announced this year that it was moving ahead with Phase II of the Parque das Conchas. According to André Araújo, president of Shell Brasil, Brazil remains “strategic” for the company and it is planning to drill up to ten new wells over the next 18 to 24 months.

ExxonMobil (Esso in Brazil): Located in Irving, Texas, ExxonMobil is the world’s largest publicly traded oil company. Approximately 84 percent of the Company’s earnings come from its operations outside the U.S.

ExxonMobil hold a forty percent operating stake in the BM-S-22 block of the Santos Basin. In July of 2009, the Company attempted to drill in the pre-salt area of the block, but came up dry. Not to be deterred, the Company is set to drill another well on this block in the fourth quarter of 2010. They plan to invest between US$25 billion and US$30 billion annually in exploration and production over the next five years.

BG Group: UK-based BG Group‘s main business is exploration for and the extraction of natural gas, liquefied natural gas and to a lesser extent oil.

BG is involved in seven exploration blocks for oil and gas in Brazil, with approximately twenty percent interest in the fields where Petrobras operates in the pre-salt, including Carioca, Guara, Iara, Iracema, Parati and Tupi. The Company recently announced that it had begun production from Tupi, and have plans to invest US$20 billion in the country until 2020.

Anadarko Petroleum: US based Anadarko has invested more than US$500 million in exploration and development activities in Brazil since 1998. The Company has made discoveries in the Campos pre-salt regions of Wahoo, Itaipu and Coalho.

In April of this year, the pre-salt Wahoo Well No. 1 had a successful flow test that indicated the well will be able to produce in a sustained rate of more than 15,000 barrels per day of high-quality crude oil. Anadarko plans to continue flow testing the Wahoo No. 2 and Wahoo South sites.

The 2010 capital program allocates approximately US$1.1 billion to exploration, with much of it focused on the company’s worldwide deepwater exploration program that includes plans to drill approximately thirty high-impact exploration – appraisal wells, of which four to six are in Brazil.

Chevron: Chevron, the second-largest U.S. oil group, holds a 51.7 percent interest in the Frade deepwater oil development project, in the Campos Basin. The project has an estimated price tag of US$2.8 billion. Development is ongoing and the estimated output should be 68,000 barrels of crude oil and 25 million cubic feet of natural gas per day, starting in 2011.

Chevron also holds 37.5 percent interest in the Petrobras-operated Papa Terra project in block BC-20 of the Campos basin. The project is estimated to cost US$5.2 billion, and first production is expected in 2013. When completed, the project is expected to be Chevron’s largest investment in Brazil.

Investments like these, along with Petrobras’ planned US$174.4 billion to increase production, ensure opportunities for the growing oilfield services industry in Brazil.