Brazil's Petrobras in negotiations to sell Urucu Field to Eneva

Rio de Janeiro — Brazilian state-led oil company Petrobras is in talks to sell the Polo Urucu natural gas field and infrastructure to Eneva, as the local gas-to-wire producer continues to expand a burgeoning hub in the remote Amazonas and Solimoes basins, Petrobras said Feb. 1.

The start of negotiations follows a complicated sales process, with Petrobras confirming rival binding offers from Eneva and upstart 3R Petroleum, which is backed by Starboard Partners, Petrobras said Dec. 4. Petrobras then launched a new round of binding offers for the Polo Urucu on Dec. 7. According to industry sources, the top offer submitted contained conditions that were rejected by Petrobras' board, leading to a new round of proposals.

Both Eneva and Petrobras indicated in separate statements that the deal still needed to be hammered out before the sale can go through.

"The signing of the sales contracts is subject to the success of negotiations, which involve commercial and contractual aspects of the transaction that will need to be approved by decision-making bodies of both parties," Eneva said in a filing with local stock regulators Feb. 2.

Eneva developed the Polo Gavioes series of gas fields that produce about 8.4 million cu m/d to 2.8 GW of nearby electricity generation, which accounts for nearly 10% of Brazil's thermal power generation capacity.

The potential deal for Urucu also isn't the first time Eneva has engaged Petrobras about the company's portfolio sale. Petrobras wants to raise $25 billion-$35 billion in asset sales over the next five years under the latest iteration of a divestment program that started in 2016.

In 2017, Eneva paid $54.5 million for 100% of the undeveloped Azulao Field in the Amazonas Basin, about 290 km (179.8 miles) from Manaus in Amazonas state. The gas will be liquefied and shipped by refrigerated tanker 1,100 km to Boa Vista in Roraima state, where it will be used to power a gas-fired plant that will produce about 70% of the state's electricity needs in 2021, according to Eneva.

Eneva also snapped up the mature Jurua Field in the Solimoes Basin, paying about $5 million for development rights to a deposit estimated to hold about 26 billion cubic meters of gas at the Open Acreage auction held Dec. 4.

Onshore exploration blocks

The company also picked up seven onshore exploration blocks in the Amazonas and Parana basins at the National Petroleum Agency, or ANP, sale, including four blocks in partnership with Brazilian independent oil and gas producer Enauta.

That followed the purchase of six blocks at the first Open Acreage sale held in September 2019.

Petrobras owns 100% of the Polo Urucu, which comprises seven separate production concessions carved out of remote Amazon jungle in the Solimoes Basin. Leste do Urucu and Rio Urucu were Brazil's fourth- and fifth-biggest gas producers in November at 6.7 million and 6.2 million cu m/d, respectively, according to the latest production report from the ANP.

The Polo Urucu, which has a history of more than 30 years of production and access to key markets in the remote Amazonas state, was originally put up for sale in June 2020.

The Urucu complex includes the Araracanga, Arara Azul, Carapanauba, Cupiuba, Leste do Urucu, Rio Urucu and Sudoeste Urucu fields.

In the first quarter of 2020 output averaged 106,353 b/d of oil equivalent, according to the sales prospectus. It included 16,525 b/d of condensates rated 49 API, 14.3 million cu m/d of natural gas, and 1.1 million tons of LPG, Petrobras said at the time.

The sale also includes four natural gas processing units, treatment and compression stations and storage facilities for oil, natural gas and LPG.

The Polo Urucu is linked to Manaus via the Urucu-Coari-Manaus pipeline, which transports about 5.5 million cu m/d across more than 700 km of dense jungle. The gas produced by the complex powers about 760 MW of electricity generation in Manaus, according to Petrobras.