When people think about operating companies in Brazil, OGX might not be the one that immediately leaps to mind. Aggressive growth plans, however, are moving the company out of the wings and onto center stage.
In an interview with Hart Energy's E&P, Paulo Mendonça, general executive officer and E&P director of OGX, described OGX’s operations.
What is the most important thing for the industry to know about OGX as an operating company?
OGX is focused on oil and natural gas E&P and was created aiming to pursue and develop opportunities in the oil and gas sector, mainly in Brazil. Since its creation in July 2007, OGX was able to recruit an experienced management and technical team and raise the capital needed to:
- Acquire a high-potential portfolio comprising 34 exploration blocks in five Brazilian and three Colombian basins, covering nearly 34,000 sq km (13,127 sq miles);
- Acquire the equipment, services, and geological and geophysical data needed to define nearly 100 prospects in 29 blocks onshore and offshore Brazil;
- Accomplish an aggressive exploration campaign comprising nearly 100 exploration wells; and
- Begin production.
After a year and a half, six offshore and two onshore drilling rigs are operating, and one other offshore rig is contracted and on location and preparing to begin drilling. Until now, 32 exploration wells have been concluded with an overall success rate of 90%.
Our first horizontal well was successfully drilled and is being prepared and equipped to start production in August of this year. Our first FPSO (floating, production, storage, and offloading vessel) arrived in October.
Currently, seven exploration wells are in progress: one in the Santos Basin, five in the Campos Basin, and one in the Parnaiba Basin. An exploratory drilling campaign will begin in the Pará-Maranhão and Espírito Santo basins this year.
OGX expects to reach production levels of 20,000 b/d by the end of the year, 730,000 b/d in 2015, and 1.38 MMb/d in 2019.
How big is OGX and how is it organized in terms of ownership?
OGX’s market cap is around $40 billion. In terms of human resources, we have 250 direct employees, 50% of whom are geologists, geophysicists, and petroleum engineers, most of them with more than 15 years of experience in the oil and gas industry. Besides that, there is a group of “first-class” Brazilian and global service companies with more than 5,000 employees working directly for OGX.
Approximately 62% of the stock belongs to EBX, represented by Centennial Asset Mining Fund LLC in Nevada, and 38% of the shares are in free float.
What is the scope of OGX’s business interests and what are its most important investments to date?
OGX’s scope is to create value from its assets through successful and efficient E&P.
Our investments reached $2.7 billion in the period between July 2007 and October 2010. One of the most important investments was in recruitment of the E&P teams. They are responsible in great part for the OGX’s success.
Another important project was the acquisition of more than 2,500 km (1,553 miles) of new 2D seismic, more than 9,500 sq km (3,668 sq miles) of 3D seismic, and more than 6,100 sq km (2,355 sq miles) of new 3D seismic. All of the offshore blocks are covered by excellent quality 3D seismic. The onshore Parnaiba Basin blocks have 2D seismic data acquisition in process, and in the Colombian concessions, acquisition will start in the second half 2011.
OGX contracted six semisubmersibles and two onshore rigs that already are operating. In addition, we have one jackup rig that recently was contracted and is ready to start operations. We also have eight support vessels and four helicopters operating in logistics support to our operations.
The company has completed 29 offshore and two onshore wells. Six offshore wells and one onshore well are in progress, and one offshore and one onshore well are about to spud. We have had no accidents and have achieved a success ratio of more than 90%.
We have drilled our first horizontal well and are preparing it for production. Our first FPSO is in the final stage of conversion in Singapore, with a planned arrival to the location in October 2011 to begin production by November 2011 through a long-term production test. All additional equipment necessary to start production already has been purchased or contracted, including wet christmas trees, wellhead platforms, etc. We also have ordered our second FPSO.
What types of plays are of most interest?
Different types of plays are of interest depending on the basin, but OGX’s most important plays in its offshore concessions range from Tertiary and Upper Cretaceous sandstones to Albian and Aptian carbonates. In the onshore Parnaíba Basin, the main plays are related to Carboniferous and Devonian sandstones.
OGX mainly focuses on the Brazilian basins. Abroad, the main areas of interest are in South American onshore basins and in the West African offshore basins. We are constantly looking for E&P opportunities both in Brazil and abroad.
Currently, we are not operating any fields, but OGX will begin by October in its first oil field in the Campos Basin. In the exploration concessions, OGX operates 27 of its 34 blocks. Based on the experience and capability of its E&P team, OGX prefers to act as operator, but this is not a closed question since OGX recognizes the eventual partner as a capable operator.
What are some of OGX’s objectives, and how have you gone about achieving them to date?
OGX’s has several objectives in its strategic plan. The objective to acquire a diversified and strong portfolio was successfully achieved through the acquisition of 34 high-potential offshore and onshore blocks.
Executing an aggressive exploration drilling campaign is another objective. Our campaign includes 87 exploration wells to be drilled from September 2009 through 2013 to find and evaluate oil and gas discoveries. This objective is in progress and has been very successful to date.
OGX plans to start production in 2011, reaching production of 20,000 b/d by the end of the year. This objective will be achieved when we start production in November with the arrival of the OSX-1 FPSO in the Campos Basin.
We plan to be producing approximately 730,000 b/d by 2015 and 1.38 MMbbl/d by 2019. To achieve that level of production, we will need 19 FPSOs, five tension-leg wellhead platforms, and 24 wellhead platforms. This objective is in progress, with the first equipment being bought or contracted in the market. Additional equipment will be constructed by OSX, the shipyard facility of the EBX Group.
What are the biggest challenges that a company the size of OGX faces?
Given OGX’s aggressive drilling and production goals, the main challenges relate to the scarcity of experienced human resources and critical production equipment in the Brazilian market. OGX plans to overcome these challenges by hiring, forming, and training recently graduated geologists, geophysicists, and petroleum engineers and to obtain its critical equipment through its sister company OSX (a shipyard under construction in partnership with Hyundai).
Has the global financial crisis impacted your plans for growth?
The answer is no, as OGX in the moment is fully funded to accomplish its main goals of exploration, to start production, and even to acquire more assets, increasing the value of its portfolio. The company’s excellent financial position and exploration results can make it easier and less expensive to grow.
Is there any interest in developing unconventional resources such as shale gas or coalbed methane?
Yes, next year OGX intends to begin evaluating unconventional resources related to shale gas and coalbed methane in its Parnaíba Basin and Colombia concessions.
Is the company pursuing any kind of renewable energy source?
Sister companies of the EBX Group are developing opportunities in power generation through solar and wind sources.
What does the company hope to achieve in the next five to 10 years?
OGX expects to be recognized as the top public/private Brazilian E&P company in terms of reserves and oil and natural gas production and the second one regarding all the companies operating in Brazil, only after Petrobras.
In the coming years, OGX will maintain its drilling schedule with the goal of continuing to discover new accumulations of oil and gas while also consolidating areas where discoveries have been made and initiating the production cycle.
We expect to begin production in the second half of 2011and will continue adding value to our portfolio in Brazil through the acquisition of new areas and abroad by means of bid rounds and farm-ins.
Contact the author, Judy Murray, at jmurray@hartenergy.com.