Will ONGC be Successful in Farming Out of Espirito Santo?

Oil and Natural Gas Corp (ONGC) is probably seeking to farm-out 30% to 40% interest in Block BM-ES-42, Espirito Santo basin, Brazil. The block, covering an area of 725 sq km, is located in the water depths of about 1,500 metres. ONGC holds 100% interest in the block. Continue reading here..

BP looks for acquisition opportunities in Brazil and Russia.. Plans to spend $20 billion in 2011.

“BP is looking to acquire stakes in Brazilian oil fields to increase the production in South America”, said Guillermo Quintero, president of BP's Brazil division, during a press conference. Guillermo added saying, "We can't reveal the names for strategic reasons, but we have two or three farm-in negotiation processes underway. We didn't come to Brazil just to continue what Devon started, Brazil is strategic for us."

Try this free document search tool

Capital of $20 billion set for 2011

BP plans to spend $20 billion to expand its operations around the world in 2011 and is looking to new areas including Brazil and Russia to increase the oil production. BP's assets in Brazil include 10 blocks. Only one of them is in production phase with output of around 25,000 bpd. Guillermo said BP's production in Brazil could reach 100,000 bpd, but did not offer a clear time frame for this.

Also, BP has plans to participate in Brazil's 11th bidding round to be held in September 2011, which will not include blocks in the coveted deep-water region known as the subsalt that is home to the country's largest oil discoveries.

Status of M&A activity in BRAZIL

Recently, BP received the final approval to complete the purchase of ten exploration and production blocks in Brazil from Devon Energy. In 2010, the Chinese were active acquiring assets in Brazil. In addition, Brazil's Mines and Energy Ministry is planning to include frontier areas in north and northeast Brazil in the highly anticipated round 11 for new oil and natural gas blocks. The round is also expected to include onshore and deepwater areas in mature basins, in addition to equatorial margin basins in the northeastern and northern regions.

The map shows the major 2010 deals in Brazil.

Source: Global E&P Transactions 2010 Review

Opportunities available in Brazil

Derrick Petroleum has aggregated all publicly announced properties for sale. Derrick’ Deals in Play is the most comprehensive data set of its kind in the industry. The following table shows the prolific opportunities available in Brazil.

Source: Derrick Petroleum E&P Transactions Database 

Though 2010 was a disaster for BP due to Macondo oil spill, 2011 seems like a progressive year for BP that has clinched the $7.2 billion alliance with Reliance and announced $20 billion capex for acquisitions in 2011. The following graph shows 2010 production and capex of BP compared with its peers.

Create your own report using this interactive tool.

Brazil to unleash its presalt potential in H2 2011

Brazil's government will auction rights to develop mammoth offshore oil and gas blocks in this year. The first auction of presalt fields could be held in the second half of the year, although new legislation on how much would be charged as a royalty on production, and how that money would be distributed among state and municipal governments would have to be approved first. 

A number of mammoth oil fields have been discovered off the southeast coast of Brazil, lying in ultra-deep water and below more than three miles of sand, rocks and a shifting layer of salt. The area is estimated to hold between 50 billion and 100 billion barrels of oil.

The auction is expected to include some of the reserves discovered in the massive Libra area, estimated by Brazil's Oil Regulatory Agency ANP to hold recoverable reserves of between 3.7 billion and 15 billion barrels of oil equivalent. These fields will be handed over under different terms from the more traditional concessions used in the oil.

Final approval for the planned 2011 auctions is still required from the country's National Energy Policy Commission, or CNPE, which will also define exactly which areas will be put up for auction. 

Why Pre-salt auctioning?

The only way for Brazil to make the most of its oil reserves is by farming out contracts to international exploration firms with the expertise and technology to break through the deep, compressed salt layer. But before Brazil opens up its reserves and takes bids from oil industry giants, the country’s parliament is hoping to secure Brazil’s financial future by ensuring the Petrobras, which owns a majority stake in the oil in question, benefits from any oil extraction programme.

The government, which owns Petrobras, will fund the exploration of pre-salt oil to the tune of $200-$220 billion (£140 billion), and will allow the firm to enter into any number of joint ventures with third parties capable of extracting oil. However, one of the major stipulations is that Petrobras will maintain a minimum of 30 per cent share in every exploration agreement it enters into.

Key Brazilian deal in last 3 years

Announce Date	Heading	Deal Value ($MM)
01-10-2010	Sinopec acquires 40% interest in Repsol’s Brazilian business	7,109
11-03-2010	Devon Energy divests Brazilian operations to BP	3,200
21-05-2010	Sinochem acquires 40% interest in Peregrino oil field from Statoil	3,070
23-12-2010	SK Energy divests Brazilian operations to Maersk	2,400
04-03-2008	StatoilHydro acquires interest in Brazilian oil property from Anadarko	1,800
27-11-2007	OGX awarded eleven exploration blocks in Brazil	754

Source: Derrick Petroleum E&P Transactions Database

Try this free document search tool

Sinopec and Petrobras collaborate to develop offshore Brazilian blocks!! Petrobras plans $224 billion investment through 2014.

Sinopec will team up with Petrobras to develop offshore areas of the Para-Maranhao basin in northern Brazil after negotiating for a year. Petrobras is planning to invest $224 billion in the five years through 2014, the largest spending plan of any oil company, to increase oil and gasoline output. “Petrobras is seeking international partners because as its production is expected to double in the next 10 years to reach 4 million barrels per day", said Petrobras’ CEO Gabrielli. He said Petrobras' strategic planning foresees the order of 169 platforms, 504 support vessels, 53 drills and 48 oil tankers until 2020.

Source: Global E&P Transactions 2010 Review

In 2010, Petrobras announced a preliminary agreement to sell stakes in two blocks, BM-PAMA-3 and BM-PAMA-4, to Sinopec. Last October, Sinopec made an entry into Brazil by acquiring 40% interest in Repsol’s Brazilian business for $7.1 billion. “Sinopec is keen to expand its overseas oil and natural-gas operations”, said Sinopec President Wang Tianpu. The keenness is justified by the following snapshot.

Source: Derrick Petroleum E&P Transactions Database

South America- the new playground for Chinese!!

The 2010 M&A activity in South America took a gigantic step by clinching deals worth $36.1 billion, a 91% increase from 2009 value of $3.2 billion. South America accounted for 17% of the total 2010 M&A value of $211 billion and was ranked the second largest region globally for the M&A activity. Brazil was the top country with several large sized transactions totalling $16 billion. 10 transactions were recorded above $1 billion, with Chinese oil and gas companies involved in five of these worth $23 billion in total.

Brazil needs fund and China needs oil & gas resources to meet the growing demand. Here ends the story - Robust Collaboration between Sinopec and Petrobras. Expecting an even more aggressive activity from South America in 2011!

Try this free document search tool

Brazil - sitting on a gold-mine of oil and gas reserves!!!!!

In a dynamic industry such as oil & gas, the recent discoveries in the presalt layers off Brazil could rank as the biggest in the world in several decades. Due to these significant discoveries, the Brazilian government has been grappling with how to structure and regulate exploration, drilling, and the potential for a large influx of foreign investment.

What is pre-salt?

• The pre-salt region is located approximately 170 miles off the coast of Brazil in the Atlantic Ocean. The region likely ranges from Espírito Santo to Santa Catarina State, measuring 497 miles in length and 124 miles in width.
• The region is named “pre-salt” because the oil is held beneath deep and ultra-deep waters, around 3,000 meters of sand and rock, and an additional layer of salt that, in places, reaches thicknesses of over 2,000 meters, making extraction challenging.

 …. tip of an iceberg!!

Over the span of 10 to 15 years, the industry’s deepwater capabilities has progressed manifold along with the realization that the largest prospects lay in deeper and deeper waters. The string of discoveries in the pre-salt region have proven the same.

• In 2006, Petrobras discovered the Tupi field in the Santos Basin which holds estimated reserves of about 5 to 8 billion barrels.
• In September 2010, the Brazilian Government announced the discovery of the Libra field which is said to be largest oil field discovered anywhere in the world since the enormous Kashagan find (over 17 billion barrels) in Kazakstan in 2000.
• Devon Energy, which holds 6 exploration blocks in the pre-salt, announced an discovery in the Campos Basin , quite close to the Jubarte field.
• The  Petrobras as operator and 45% owner, has made an important discovery of very light oil in the ultra-deep waters of the Santos Basin.
• Maersk Oil has discovered oil in the offshore Campos Basin in a license jointly owned with the Brazilian independent OGX.

Source: Derrick Petroleum Planned Exploration Wells Database

As a result of recent major discoveries, oil and natural gas potential reserves in Brazil are now recognized as some of the largest in the world. . Hence, many foreign players are ready to dip their toes in the waters off Brazil.

Source: Derrick Petroleum E&P Transactions Database

The combination of vast untapped potential oil and natural gas resources with a favorable regulatory framework positions Brazil as one of the most attractive petroleum regions in the world today.

Galp to sell $4.2bn stake - Opportunity for foreign oil companies looking to make inroads into Brazilian Presalt

Galp Energia is considering the sale of a 30% stake in its Brazilian assets to finance the company's investment plans. The sale of these assets could generate as much as 3 billion euros ($4.2 billion) for the company.

Galp Eenrgia’s Brazil operations overview:

-- Participation, in partnership with Petrobras, in 22 projects, 17 offshore and 5 onshore, totalling 36 blocks spread over seven basins covering area of 20,326 sq km

-- According to DGM 2010 year end reserves report, Galp’s net entitled Proved + Probable reserves - 397 MMBOE; Proved + Probable + Possible reserves - 574 MMBOE (Brazil's Lula and Cernambi fields responsible for over 90% of total reserves)

-- Santos Basin: Block BM-S-11 (10%), Block BM-S-8 (14%), Block BM-S-2 (20%), Block BM-S-24 (20%); BM-S-11 contains Lula and Cernambi fields (formerly Tupi and Iracema) with total recoverable volume of 8.3 billion BOE; 9 FPSOs sanctioned for the Lula and Cernambi development; FLNG FEEDs already concluded with final investment decision expected in 2011; In 4Q-2010, the field’s pilot net entitled production was 2,170 BO/d.

-- Espirito Santo Basin: Block ES-M-592 (20%) covering 722 sq km in the water depths of 2,000-2,200 metres.

-- Potiguar Basin: BM-POT-16 contract (20%) includes Blocks POT-M-663 and POT-M-760 covering 1,535 sq km in the water depths of 50-2,000 metres; BM-POT-17 contract (20%) includes Blocks POT-M-665, POT-M-853 and POT-M-855 covering 2,302 sq km in the water depths of 50-2,000 metres; In onshore, Galp has 14 blocks with eight appraisal wells drilled in 2009, which confirmed to light oil discoveries.

-- Campos Basin: Block C-M-593 (15%) covering 85 sq km in the water depths of 100-400 metres.

-- Pernambuco Basin: PEP B-M-783, PEP B-M-839 and PEP B-M-837 with 20% interest covering 1,713 sq km in the water depths of 1,000-2,000 metres; A 3D seismic programme was performed in 2009.

-- Sergipe Alagoas Basin: Blocks 412 and 429 with 50% interest covering 91 sq km; In 2009 four exploration wells were drilled, which led to two discoveries, and one appraisal well.

-- Amazonas Basin: Blocks AM-T-84, AM-T-85 and AM-T-62 with 40% interest covering 5,718 sq km.

Stake sales to generate intense interest from foreign oil companies

Galp, a smaller company focused mainly on refining for its domestic market, faces difficulties in raising the cash needed to finance its share of development and exploration costs for the Brazilian assets. The possible stake sale would generate intense interest from foreign oil companies looking to make inroads into Brazil, where a recent overhaul of the country's oil laws now places the pre-salt region under a production-sharing regime.

For more on Brazilian Presalt  http://docsearch.derrickpetroleum.com/research/q/presalt%20basin.html