Learn more about Hart Energy Conferences
Get our latest conference schedules, updates and insights straight to your inbox.
RIO DE JANIERO—In a country where offshore E&P is responsible for 95% of the total oil and gas output, Brazil’s onshore projects have always been put aside in terms of investments and major operators’ attention.
Due to the large volume of oil found off the Brazilian coast during recent years, mainly in the presalt layer, all eyes are on potential offshore activities. However, Brazil’s government wants to give local small operators more opportunities onshore.
The goal is ambitious. According to Brazil’s Oil and Gas Secretary, Marcio Félix, the government is working to create conditions to triple its current onshore output by 2030.
Currently, Brazil produces an average of 143,000 barrels of oil per day and 26 million cubic meters of gas per day in eight Brazilian states.
“We are performing at the economic limit in some areas. So we are working to implement a set of policies in order to open a new opportunity frontier and offer more areas,” said Félix. “We want to attract more operators and give them more diversity in terms of [the] supply chain so we can turn the country’s onshore industry into another important development source.”
In order to achieve this goal, the energy ministry launched the Onshore Exploration and Production Revitalization Plan on Jan. 31. This plan, which combines a set of incentive measures, intends to design an onshore rounds schedule, local content rule exemption, tax cuts and a policy supporting small producers.
One of those incentive measures—the local content rule exemption—will be implemented during the 4th licensing round for areas with marginal accumulations. The round is scheduled for May 11.
In a time when major offshore operators are struggling to get less strict local content rules, which is brewing controversies and a judicial battle in Brazil, this move can be seen as a positive step toward revitalizing Brazil’ sonshore segment.
“Although we still wait for more advances in the regulatory framework, the local content exemption is a good example of how the energy ministry is changing its view on the Brazilian onshore industry,” said Anabal Santos Jr., manager of the Brazilian Association for Independent Producers of Oil & Gas (ABPIP).
The fourth bidding round, focusing on marginal accumulations, includes nine areas: Araçás Leste, Garça Branca, Iraúna, Itaparica, Jacumirim, Noroeste do Morro Rosado, Rio Mariricu, Urutau and Quiricó Valley. These areas are divided into three sedimentary basins: Espírito Santo, Potiguar and Recôncavo.
Foreign companies may participate in the round, according to the National Agency of Petroleum, Natural Gas and Biofuels, the Brazilian oil and gas regulator.
However, Santos emphasized that the areas to be auctioned have low production and will not attract companies that need better conditions to operate.
“The very low level of production, along with regulatory difficulties and other bottlenecks faced by the onshore segment, will cause the lack of interest by the operators,” Santos said.
The former bid round for marginal areas was carried out in 2015. Eight companies acquired 10 fields in Brazil’s northern and southern states. The fields are in the Barreirinhas, Espírito Santo, Paraná, Potiguar, Recôncavo and Tucano Sul basins.
Despite the concerns mentioned, the ABPIP managersaid he is confident about the government’s onshore revitalization plan. “After being forgotten for more than a decade, I’m sure that this plan will change for the better the investors’ mood, once they start to see those policies put in place. ”
But attracting more operators is a challenging task. Despite having 23 onshore producers, state-owned Petrobras accounts for 96% of the total output.
Besides the local content exemption, Brazil’s oil and gas secretary said that a major tax cut is on the way to lure small producers to invest in onshore fields. According to Felix, the government’s intention is to reduce royalty taxes from 10% to 5% in areas with low oil and gas output.
Brazilian oil and gas legislation allows the federal government to establish the tax percentage for each area. However, that specific incentive policy needs to be discussed in Congress because many cities depend on oil royalty receipts.
Recommended Reading
Drilling Automation Systems Provide Consistency Across Wells, Fields, Personnel
2024-01-09 - Automated drilling systems don’t get tired, forgetful or concerned about the type of rig or formation.
8 Rivers, Casale Partner to Advance Hydrogen Technology
2024-01-17 - The CO2 convective reformer will enable 8 Rivers’ 8RH2 technology to capture nearly all CO2 as part of its process, the company says.
TGS, SLB to Conduct Engagement Phase 5 in GoM
2024-02-05 - TGS and SLB’s seventh program within the joint venture involves the acquisition of 157 Outer Continental Shelf blocks.
Trendsetter Completes Two Deepwater Well Stimulation Campaigns
2024-01-24 - Trendsetter Engineering's campaigns resulted in the “successful” acid treatments of a combined six wells using their subsea tree injection manifold.
StimStixx, Hunting Titan Partner on Well Perforation, Acidizing
2024-02-07 - The strategic partnership between StimStixx Technologies and Hunting Titan will increase well treatments and reduce costs, the companies said.