Brazil might not seem like the easiest place to launch a new offshore oil company. Prices are high, offshore activities have timing risk, and it is imperative to choose one’s partners wisely. In addition, the energy market is dominated by Petrobras.

But the founders of Brasoil do Brasil were not deterred. They acquired a portfolio of assets from Queiroz Galvão in 2006 and secured financing in 2007. The initial deal was closed in December 2007, and the company has not looked back, according to Don Parker, president, chief executive officer and director for Brasoil.

Brasoil is a private company engaged in the production, development and exploration of oil and gas in Brazil. It has a portfolio of assets that includes a producing gas field, undeveloped oil and gas projects, and highly prospective exploration acreage. It has developed strong operating ties with its partners, including Petrobras, Queiroz Galvão, and Panoro Energy.

Since receiving Agência Nacional do Petróleo (ANP) approval in 2007, Brasoil has been active in shallow water offshore Brazil. The company acquired a 50% interest in three shallow-water blocks in the Santos Basin in Brazil’s Round 9 licensing and has since conducted a successful 3-D seismic survey. Earlier this year, Brasoil farmed out its Round 9 blocks to Vanco Brasil Exploração e Produção de Petróleo e Gas Natural Ltda., a subsidiary of Vanco Overseas Energy Ltd., for a well commitment on each block, a 15% carried interest, and recovery of sunk costs.

Assets In Shallow Water

Brasoil acquired blocks S-M-1036, S-M-1035, and S-M-1100 in Round 9. According to Parker, the company originally identified two prospects from existing 2D seismic data. “After the round and with further examination of the data, a third prospect was identified,” Parker said. The company then acquired a 302-sq-mile (783-sq-km) 3D survey in 2009. “Drilling is anticipated later in 2011 or in 2012.”

While the shallower parts of the basin are relatively unexplored, a number of commercial oil and gas discoveries have been announced. “The play concept is to look for areas that have salt windows or faults that will permit oil to migrate from deep source rocks to shallower reservoirs,” Parker said, noting that several discoveries have been made around Brasoil’s blocks.

Additional assets include a 10% stake in Manati, one of Brazil’s largest non-associated gas fields. The field, operated by Petrobras, nets Brasoil about 24 MMcf/d of gas. Manati consists of six offshore natural gas wells located in 131 ft (40 m) of water. The wells are tied to a production platform six miles (10 km) offshore. Brasoil also has partial ownership in the processing facility and the 76-mile (125-km) pipeline that delivers the gas to the Bahian market and beyond.

Brasoil has entered into a long-term natural gas contract with Petrobras, with a fixed price indexed to inflation, at over $6/Mcf. This has provided the company with a stable revenue stream, Parker said.

Further development is scheduled for 2012 or 2013 and will include an additional well and compression facilities. “The infrastructure can support additional deliverability, making the Manati field a low-risk growth area,” Parker said.

Brasoil also holds a 10% interest in the Camarao Norte gas discovery just south of Manati. “This field will be developed later to backfill regional demand for gas,” he said. In the meantime, efforts are underway to unitize this field with El Paso’s interests off block that have also encountered gas.

In the Santos Basin, Brasoil has a 15% interest in two development projects, Coral and Cavalo Marinho. According to Parker, Brasoil intends to develop these fields in conjunction with other discoveries in the area with first production expected in 2015. Parker expects his company to net an additional 5,000 boe/day.

Plans Going Forward

With a solid portfolio of production along with exploration and development potential, Brasoil has hit its stride as a shallow-water player offshore Brazil. It has plenty to keep it occupied.

“The farm-out of the Round 9 blocks has been submitted to the ANP for approval,” Parker said. “It is anticipated that the approval will be received later this year and that we will be ready to drill by the first half 2012. Brasoil, in addition to its carried 15% interest, has an option to participate for another 5% in each of the three wells. The wells could take as long as 90 days to drill, which will keep us quite busy for most of the balance of 2012.”

He added that the company’s near-term production target is 4,000 boe/d throughout the second half 2011 and beyond.

Right now Brasoil is happy to stay close to the coast. Deep water, Parker said, “is not a great fit for us at the moment, but we will be paying close attention to how the opportunities with regard to the presalt and the equatorial margin plays in northeast Brazil will unfold.”

As far as becoming an operator, Brasoil has been qualified to operate onshore and in shallow water in previous bid rounds. The company’s current asset mix allows it to be an active participant at operating and technical committees. “We would be looking for operatorship in certain situations where it makes good sense going forward,” he said.

The company also is evaluating future offerings onshore. “We believe it is vital to get scale to bring the economies onshore in line with what we see in the shallow water,” Parker said.

As for operating outside Brazil, “it is still early,” Parker said, “but the acreage needs to be available to keep our full attention there. We believe the opportunities in Brazil are extensive as it is still very early in the country’s exploration lifecycle, so we continue to look hard there.”

Brasoil is very encouraged that the government in Brazil has agreed to proceed with an offshore round later this year. The bid area includes sectors of the northeast Brazil under-explored equatorial margin play that will generate significant interest by both seasoned local players and international new entrants.

“We are investing in new proprietary prospect generation by acquiring and interpreting extensive 2D seismic data and tying it into regional geological architecture models in preparation,” he said.

Over the next five years, Parker hopes to increase the company’s production base through additional leasing and working interest agreements. He also hopes to expand the company’s exploration portfolio.

One huge step might be to take the company public. Such a step could be necessary to achieve his final goal -- to create a multi-billion dollar E&P company in Brazil.

Contact the author, Rhonda Duey, at rduey@hartenergy.com.