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Oil Majors Chase Pre-Salt Hydrocarbon Riches in Brazil

Over the next few years the exploration drive in the pre-salt hydrocarbon plays of Brazil is going to shift away from national oil company Petrobras towards the global oil majors.
This article appeared in Vol. 16, No. 4 - 2019

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Oil Majors Chase Pre-Salt Hydrocarbon Riches in Brazil

Brazil is on the verge of a revival in exploration activity in deep waters, driven primarily by oil and gas majors in the pre-salt of the Santos and Campos Basins. Drilling through thick salt domes poses various geotechnical challenges, but the high success ratio, large resource volumes and impressive recovery rates so far have attracted investments from deep-pocketed E&P companies.

Brazil held four pre-salt bidding rounds for production sharing contracts in 2017 and 2018; 13 exploration licenses were awarded, with several majors picking up acreage. These rounds raised an impressive $4.4 billion in signature bonuses, around 80% of the total exploration investments made in Brazil in 2017 and 2018.

Over the next three years the exploration drive in the pre-salt play is going to shift away from national oil company Petrobras towards the majors, as they will cover close to 50% of the pre-salt exploration drilling from 2020 to 2022. Numerous high impact wells are also on the cards.

ExxonMobil will be extremely active in the pre-salt going forward, having applied to drill up to 22 pre-salt wells in the Santos and Campos Basins, including in the Uirapuru and Tita blocks it acquired in previous pre-salt rounds. UK supermajor BP has revived its position in Brazil over the last two years, paying signature bonuses of ~$400 million for the four licenses it acquired. It plans to drill three wells in the Pau Brasil block it operates, the first scheduled in August 2020, and a further six in the Alto de Cabo Frio Central block, plus one in the Dois Irmaos block. The company had been optimistic about its Peroba block well, targeting 5.3 Bboe, but it unfortunately failed to encounter commercial hydrocarbons.

  • Number of net exploration wells and exploration expenditure on pre-salt assets in Brazil. Source: Rystad Energy ECube.

Chevron has made a return to Brazil through its recent pre-salt round wins in the Tres Marias and Saturno blocks, while Shell has taken stakes in five licenses in the last four pre-salt rounds, operating in three of them. Shell and Chevron ambitiously plan to drill up to five wells on Saturno, the first expected in January 2020. Shell will also drill five wells over the next two years in the Alto de Cabo Frio West and Gato do Mato South blocks. Both companies won stakes in Brazil’s 14th and 15th concession rounds in the vicinity of the pre-salt polygon where a drilling campaign is planned in 2021. 

The 6th pre-salt licensing round, scheduled for November 2019, will feature four blocks in Santos and one in the Campos Basin and is expected to raise close to $2.1 billion in signature bonuses. Petrobras has already registered its preference to hold a 30% stake in three of the blocks on offer, but the round provides ample opportunity for international players to raise their positions in Brazil. All the blocks on offer are close to the big pre-salt discoveries, increasing hopes for exciting new finds in the region. Further pre-salt rounds are lined up for 2020 and 2021.

This regional oil and gas updates is brought to you by Rystad Energy.

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