RIO DE JANEIRO—What is the future of the oil and gas segment in Brazil? That was the main question asked repeatedly during the Rio Oil & Gas 2016 conference in October.

Concerns about the oil and gas industry in Brazil have merit.

Low prices, intervention by the Brazilian government and the corruption scandal involving Petrobras still loom over the industry in the country. Yet the event, which was opened by the new president of Brazil, Michel Temer, was also a stage for positive expectations for the next few years.

Of the many issues discussed by executives, exhibitors and members of the Brazilian government, presalt and upcoming 2017 oilfield auctions were the hottest topics during the three-day conference. From the government side, the aim was to convince roughly 34,000 people that Brazil’s oil and gas business environment is changing for the better.

“We will create a very favorable business environment. I have a special affection for institutional systems and for the rule of law, and we must follow what the Brazilian Constitution says about the importance of the establishment of a partnership between the government and private sector,” Temer said during the opening ceremony, adding that the financial recovery of Petrobras as well as the industry as a whole is important to ease the severe economic crisis that Brazil is currently facing.

Oil Bid Rounds

The resuming of oil bid rounds in 2017 and the recovery process of Petrobras are examples of how the Brazilian government is committed to boosting the segment, the president said. Other areas of the Brazilian presalt will be on the radar. It’s been about three years since the last auction featuring presalt acreage—the Libra oil field. But the next presalt bid round will take place under a new regulatory framework. Brazil’s Congress approved changes that ended Petrobras’ monopoly in ultradeepwater oil reserves activities.

According to the Brazilian National Agency of Petroleum (ANP) Blocks Definition Director Eliane Petersohn, the extension of the Carcará presalt oil field, located at the Santos Basin, is expected to be the largest to be auctioned. During the panel discussion “Investment in the Exploration Sector: Hindsight, Current Status and Future Prospects,” she said this part of the field has roughly 2 Bbbl of oil in situ.

“With the new regulatory frame, the next presalt auctions are going to attract major oil companies,” she said.

This is the case for Statoil, which operates in the contracted area of the Carcará oil field. The company intends to acquire the other half, Statoil’s Brazil Manager Paul Eitrheim said during the conference. The Sapinhoá, Tartaruga Mestiça and Gato do Mato fields also are expected to be auctioned in 2017, according to the ANP.

Libra Oil Field

Although the upcoming auctions provided a positive outlook, the Libra oil field—the first presalt field auctioned—gained much attention during the conference.

Located at the Santos Basin southeast of Brazil, Libra was auctioned in 2013 and sparked a great demand for subsea equipment. Attendees packed a room on Oct. 27 during the conference to hear what the executives had to say about the progress of the activities in the giant oil field of Libra, which has between an estimated 8 Bbbl and 12 Bbbl of oil resources.

During the conference, the speakers talked about the progress made since the signature of the contract in December 2013 and how the consortium is working to overcome the challenges presented in the field. “The consortium has many challenges ahead. We have to advance the commercial production to begin cost recovery, and we need to match the expenditure with the recovery in order to maximize the return on investment,” said Fernando Borges, the E&P executive manager responsible for the Libra Field. “The combined effect of cost reduction and increase in recovery factor can lead to competitive breakeven prices.”

Also, the executive stressed that the country’s local content rule represents another great challenge for the activities in Libra.

“Local content is really challenging. The requirements are extremely high and disconnected with Brazil reality,” he said. “We are subjected to penalties if we fail to accomplish the minimum percentage required. And this is our greatest concern. It is crucial to have a rule on waivers for a more stable financial position of the project.”

The Libra Consortium is formed by Petrobras (operator, 40%), Shell (20%), Total (20%), CNPC (10%) and CNOOC (10%), with shared production contract management by Pré-Sal Petróleo S.A.

Four Production Systems

Even with all the challenges, Borges shared good news, saying the Libra Consortium will install four production systems in the presalt oil field. The first production system is expected to be installed by 2020, with one added each year through 2023.

The first Libra pilot production system will have the capacity to produce 180,000 bbl/d from 17 wells. These include eight production wells and nine for water injection. The subsea systems will have eight subsea flowlines. Natural gas produced will be reinjected.

“The goal is to acquire reservoir dynamic data to better dimension the definitive production system.”

—Brunno Braga