Shell has been doing business in Brazil for a long time now, having marketed oil products in the Latin American energy powerhouse since 1913 and with significant downstream operations including approximately 3,000 retail sites and aviation, biofuels, and other commercial businesses.

From an upstream perspective, however, the company did not really get going until the 1970s, when it became the first integrated oil company to discover crude in Brazil. But it was the liberalization of Brazil’s oil and gas market in 1998 that lead to a rapid increase in Shell’s exploration and development activities in the country.

This is perhaps represented best by the company’s ultradeepwater Parque das Conchas (formerly BC-10) heavy oil project in the Campos basin. It was the first field in Brazil that Shell took from exploration through to production, drilling the first discovery well in 2000 to producing first oil in July 2009. The company also produces oil from the Bijupira and Salema fields in the same basin and has interests in 12 exploration concessions as well as a share in Petrobras’ producing Merluza gas field.

Key global market

Peter Voser, Shell’s CEO, took up his leadership position the same month that Parque das Conchas began flowing, and the following four years have been a successful tenure for the Swiss-born executive.

Shell has multibillion-dollar projects under way continuously all around the world, but Voser believes Brazil is one of the key global markets.

Talking to E&P during a recent visit to Rio de Janeiro, alongside Andre Araujo, president of Shell’s country unit, Voser reaffirmed the company’s intent to do plenty more business there. “From a demand point of view we see Brazil as one of the biggest markets in the world,” he said. “Brazil is one of our heartlands. I look forward to seeing it remain part of the Shell portfolio and growing further in the years and decades ahead.”

Meeting with Brazilian President Dilma Rousseff to discuss new investments, Voser confirmed that Shell was interested in doing further business with state-owned major Petrobras as well as participating in upcoming licensing rounds later this year.

Voser went on to highlight the upcoming licensing rounds, adding that they would “hopefully confirm further natural reserves that can be developed, either onshore or offshore.”

Brazil’s first eagerly awaited presalt bidding round, where the giant Libra discovery in the Santos basin is up for grabs, is due to take place in October this year. Estimates for Libra’s reserves have risen continuously, with the field – discovered in 2010 – now believed to hold between 26 Bbbl and 42 Bbbl of oil in place, with between 8 Bbbl and 12 Bbbl being recoverable. The field also will be Brazil’s first taste of the production-sharing system, used so regularly elsewhere in the world, which it has decided to employ to help it in the daunting task of developing its massive presalt reserves.

The country’s national petroleum agency, the ANP, has the next bidding auction (Round 12) lined up for November this year, which will focus largely on onshore natural gas acreage.

Interested party

In both cases Shell is obviously an interested party. Not only does the major see gas as the global “fuel of the future,” but it also has long-established links with Petrobras. This could be particularly useful during any talks about its potential involvement in the further exploration and development of the Libra resource since Petrobras is legally bound to be the future operator of any of the pre-salt concessions with a minimum 30% stake.

Voser told E&P, however, that it was still “too early” to guarantee participation in the rounds since the company is still working on the technical analysis. “Shell will study these bid areas, do the technical evaluation, and then decide how – and for how much – we will participate.”

He added that he did not consider it a disadvantage having the legal obligation of Petrobras as operator of presalt concessions with a minimum 30% stake, although this commitment itself has raised concerns more widely about the financial capacity of the state-owned major to exploit them at a reasonable pace. Shell has had “very successful partnerships with Petrobras” both in Brazil and internationally. “I would consider Petrobras one of the best operators in deepwater. Given that we also are a pioneer, when you bring them together, that could be quite an interesting operation,” he said.

Voser also pointed out that Shell is interested in potentially acquiring further assets in Brazil and the US Gulf of Mexico, including blocks owned by Petrobras. The Brazilian company’s five-year business plan for 2013 to 2017 includes US $9.9 billion of assets being put up for sale, mostly before the end of this year. “It is one of the most strategic deepwater areas for Shell, and the company will continue to negotiate with partners in the region, including Petrobras,” Araujo said.

Work to be done

In the meantime, of course, there is plenty of work that remains to be done in Brazil for Shell. The company’s ultra-deepwater Parque das Conchas field 110 km (68 miles) offshore, in which it holds a 50% stake as operator with its partners Petrobras (35%) and India’s ONGC (15%), is currently in the midst of its second phase of development.

The Noble Bully II drillship is presently in the midst of a program to drill 11 wells, including seven production and four water-injection wells. The field’s initial phase saw production via nine wells on three fields – Abalone, Ostra, and Argonauta B-West – while Phase 2 is focused on bringing the Argonauta O-North field online. The field’s heavy oil (16°API to 42°API) meant electric submersible pumps were needed to push the crude the 1,800 m (5,906 ft) to the surface for processing on the Espirito Santo FPSO vessel. Parque das Conchas also was the first full-field development using subsea oil and gas separation in addition to subsea pumping.

With more than $2 billion invested in the second phase, production is scheduled to start flowing later this year, Voser said.

“We are on schedule. We also are evaluating, technically and economically, Phase 3 and should make a decision later in 2013 or maybe in 2014,” he added.

The field is, incidentally, one of those that Petrobras is reported to be putting up for sale in Brazil, alongside the Xerelete and Maromba fields.

Voser told E&P that Shell studies all opportunities. “I understand Petrobras is reducing its portfolio. As usual, Shell will look at it and decide whether to go for it or not, depending on the attractiveness,” he said. Araujo added, “I can say we are very happy. It is a project we know and that we believe in, and we are satisfied with our partners.”

Editor’s note: Peter Voser will retire as CEO of Shell in the first half of 2014 after 29 years with the company.