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RIO DE JANEIRO—Despite challenges ahead, Brazil’s government wants to increase unconventional gas E&P over the next years.
According to ANP, the country’s national oil and gas regulator, Brazil is expected to have roughly 414 trillion cubic meters of recoverable shale gas resources in the Paraná, Solimões and Amazonas basins. This would position the country to have the world’s 10th largest shale gas resources.
Also, if investments in the unconventional gas activities take place in Brazil, production of this type of fossil fuel could reach 3 million cubic meters a day by 2026, according to the state-owned Energy Research Co. (EPE).
Yet, unconventional gas development in Brazil is far from reality. Even with favorable geological characteristics, exploration depends on overcoming regulatory barriers and technological hurdles. The country’s strict environmental rules appear to be deterring companies.
For many experts in Brazil’s oil and gas segment, the country’s energy policymakers need to pursue geological studies to gain insight on required technologies used in shale gas exploration. Everything depends on R&D.
Another barrier is the economic one.
“That is why it is imperative to be prepared to welcome fracturing technologies, rigs and qualified workforce by the time prices are stabilizing and clashing again with the traditional E&P activities,” Rio de Janeiro Federal University Professor Jorge Castro said.
Neighboring Argentina can be seen as a good example for successful unconventional gas in South America. Argentina’s Vaca Muerta shale play, the world’s second-largest shale gas reservoir, has landed big investments from major oil companies such as Royal Dutch Shell (NYSE: RDS.A) and ExxonMobil Corp. (NYSE: XOM).
However, Brasília is working to make progress. In July, Brazil’s Oil and Gas Director João Carvalho Vieira said the government is discussing policies that are likely to attract investors and boost shale gas output in the country.
“The idea is to bring everybody to the table to gain a broader understanding about the benefits and risks of unconventional gas,” Vieira said during an event in Rio de Janeiro. “There are some misunderstanding reactions to the technique of hydraulic fracturing, but nobody knows the potential of these resources.”
Vieira also said it will only address the issue of reservoirs that require high-intensity hydraulic fracturing after the 14th round, which will take place this year.
ANP carried out the 12th licensing round in November 2013. The regulator offered 240 blocks, many of which are considered prospective for unconventional gas. Yet, only 72 blocks were acquired, and the round was dominated by Brazil’s state-owned Petrobras, with participation from smaller independents.
Petrobras picked up acreage in southern Brazil’s Paraná Basin. The area could hold an estimated 226 trillion cubic feet (Tcf) of recoverable shale gas resources. The company also acquired acreage in the São Francisco Basin in Minas Gerais State, which is estimated to have 80 Tcf of recoverable shale gas resources.
However, Brazil’s Federal Justice has suspended E&P operations, alleging ANP has not been clear about likely damages that unconventional gas activities may cause to the environment.
According to Brazil’s Federal Prosecution Office (MPF), the suspensions were implemented in response to concerns about water and ground contamination. ANP and MME have appealed the decision, but the suspension is currently valid.
MPF is requiring further evidence and requesting an environmental assessment of the sedimentary area. It also demands regulations for use of hydraulic fracturing for production of unconventional resources.
In addition, MPF wants Brazil’s government to mandate adoption of an environmental management system that contains a plan for the control, treatment and disposal of waste. The institution also requires the performance of preliminary studies, such as fracturing simulations and risk analysis, which are necessary for ANP approval of the operations.