In the late 16th century, a Portugese explorer wrote that he felt ashamed to describe the riches of Brazil out of fear that they were too immense to believe. Yet he never could have imagined the nature of the riches discovered offshore Brazil 400 years later that have placed it once again as a frontier of new world exploration.

While recent oil discoveries in the presalt layer of the Santos basin – approximately 186 miles (300 km) offshore southeastern Brazil – have put the country on the global energy map, the fortunes and performance of Brazil’s oil sector have been evolving for more than a decade. In 1997, management of Brazil’s energy sector was reformed, and national oil company Petrobras was partially privatized. Since then, production has rapidly expanded largely due to the development of substantial deepwater reserves in the prolific Campos basin.

Brazil’s oil, gas revival

Over the last 10 years, Brazil’s crude oil production has doubled to more than 2 MMbbl/d, making the country not only self-sufficient in oil but a net oil exporter. The development of deepwater gas assets and associated gas from presalt fields also will enable Brazil to reduce its dependence on gas imports, which have come primarily from neighboring Bolivia. Today, Brazil stands at the cusp of an exciting new era.

By raising offshore production, particularly in deep water, Brazil has moved from a net oil importer to a net oil exporter. (Source: Energy Information Administration)

Brazil’s oil production growth has gathered momentum with the development of major deep- and ultra-deepwater fields in the Campos basin. Infield Systems data show these larger fields include:

  • Roncador, in 6,079 ft (1,853 m) water depth, which produced 2.9 Bboe;
  • Marlim, in 2,740 ft (835 m) water depth, which produced 2.542 Bboe;
  • Marlim Sul, in 3,543 ft (1,080 m) water depth, which produced 1.466 Bboe;
  • Marlin Leste, in 3,543 ft (1,080 m) water depth, which produced 269 MMboe; and
  • Albacora Leste, in 4,068 ft (1,240 m) water depth, which produced 824.4 MMboe.

In 2010, Phase Two of the Jubarte field (572 MMboe) came onstream and is forecast to reach peak production of 100,000 boe/d. Further development of the Marlim Sul and Roncador fields is expected in the near term as well as startup of the Brava field (60,000 b/d in 2,126 ft or 648 m water depth). Brava is a Marlim-area satellite field with start-up expected in the next few years.

The Campos basin is the source of more than 80% of Brazil’s crude oil production. The Espírito Santo basin, north of the Campos basin, hosts the Golfinho and Golfinho Southwest developments, with 500 and 150 MMboe in reserves, respectively, in approximately 4,547 ft (1,386 m) water depth. Production from these fields has been disappointing so far, with the Capixaba floating production, storage, and offloading vessel already relocated to the nearby deepwater Cachalote field.

Except for the Marlim field, which began producing in 1991, these Petrobras-operated deep- and ultra-deepwater fields in the Campos and Espírito Santo basins came onstream between 2000 and 2008.

Larger field discoveries have been made in deeper water environments since the mid-1990s. This suggests the size of oil fields will continue to increase as discoveries are made in deeper water environments. (Charts courtesy of Infield Systems)

Petrobras passes the salt

As Petrobras developed its deepwater discoveries, it established itself as the leading deepwater oil producer in the world. In more recent years, its presalt discoveries, mainly in the Santos basin, have positioned the company to become an even more prolific deepwater oil and gas producer.

Petrobras first discovered oil in the presalt layer offshore southeast Brazil in the Parati block of the Santos basin in 2005. Since then, further substantial discoveries have been made. Estimates suggest Brazil’s presalt reserves eventually could amount to tens of billions of barrels.

Some of the major presalt fields that have been discovered since 2005 include the Lula (formerly Tupi), Jubarte, and Baleia Franca fields. Test production began at the Lula field in May 2009. Petrobras expects output to reach 100,000 b/d in the near term when the first pilot well is in place. Production also has begun in the presalt layers of the Jubarte and Baleia Franca fields in the northern Campos Basin.

By the middle of this decade, several of Brazil’s largest presalt fields are expected to begin production. The impact on Brazil’s production outlook likely will be quite dramatic provided that the technological and financial challenges of extracting presalt oil can be met. By 2020, Petrobras expects presalt production to reach more than 1 MMbbl/d. The full extent of Brazil’s presalt reserves is not yet known.

The size of gas fields by reserve size suggests production will continue to increase as larger field discoveries are made in deeper water environments.

What can be understood is that Brazil’s oil and gas production has been increasing due to development of fields in deeper and deeper waters. Infield data show that of the top 20 fields by reserve size that have come onstream in Brazil since 1995, only one is in shallow water (less than 1,640 ft or 500 m). This trend likely will continue as larger field discoveries are made in deeper water environments.

According to Infield’s “Deep and Ultra-Deepwater Market Report to 2015,” while 28 deepwater fields came onstream between 2006 and 2010 in Brazil, this is expected to increase to 42 fields during 2011-2015. Not all fields expected to come onstream between 2011 and 2015 are presalt fields operated by Petrobras (Brazilian independent OGX is expected to feature prominently in field development, for example); however, the company is forecast to be the driver of deepwater capital expenditure in the country.

Petrobras is expected to invest more than US $54 billion in deepwater activity between 2011 and 2015; total deepwater investment in Latin America during that time is expected to be $62 billion. Major international companies such as Shell, ExxonMobil, BG Group, and Chevron, along with independents such as Anadarko Petroleum Corp. and El Paso, are expected to contribute to developing Brazil’s offshore assets, although not to the same extent as Petrobras.

Brazil’s resource nationalism

Petrobras’ central role in the development of Brazil’s presalt reserves recently was confirmed by legislation that guarantees the company a minimum 30% equity share in presalt field developments for unlicensed blocks. Participation from companies other than Petrobras would involve negotiating production-sharing agreements. A further law that was passed created a new government authority, Pré-Sal Petróleo SA, to manage Brazil’s presalt assets. Both the state and Petrobras will play a central role in developing presalt fields.

The Lula/Lula Southwest field has the largest reserve size of all of Brazil’s major presalt discoveries.

The financial cornerstone of Petrobras’ investment plans was the initial public offering in September 2010 that raised $70 billion, potentially the world’s largest public stock offering. This offer included a $43 billion oil-for-shares swap agreement with the Brazilian government that will give Petrobras development rights to 5 Bbbl of oil in exchange for a larger share of state ownership of the company’s shares. To date, Petrobras has acquired 3.1 Bbbl from the Franco field, while the Iara and Florim fields will account for another 1.07 Bbbl each. Petrobras also will receive rights to develop oil at the Lula Northeast and Guara East fields.

Petrobras has set an ambitious oil and gas production target. It aims to reach total oil and gas production of 3.9 MMbbl/d by 2014 (for both Brazilian and international operations), of which 241,000 b/d will come from presalt fields. The company’s total oil output in Brazil is targeted to reach 3 MMbbl/d in 2014 and 3.9 MMbbl/d in 2020, with presalt oil output alone to reach 1.1 MMbbl/d by 2020. Petrobras also plans to increase domestic natural gas production from 384,000 boe/d in 2010 to 623,000 boe/d in 2014, and to 1.1 MMboe/d in 2020, mostly by the capture of associated gas in its already producing and newly developing oil fields.

In the last decade, Brazil has been able to transform its stagnant oil and gas sector by raising offshore – especially deepwater – production. As this decade proceeds, developing presalt oil reserves likely will build on this growth and make Brazil one of the major oil producers in the world.