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Brazil's Petrobras, partners return part of Libra production-sharing block

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Brazil's Petrobras, partners return part of Libra production-sharing block

Highlights

Covers southeast portion of block

Group drilled one well in area

Peroba Block returned in January

Rio de Janeiro — Brazilian state-led oil company Petrobras and its partners developing the offshore Libra production-sharing area in the country's subsalt frontier returned the southeast portion of the block, Petrobras said April 16.

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"Since the start of the evaluation activities at the Libra Block, the southeast area that is distinct from the rest was identified as an area with low potential," Petrobras said in a statement. "The conclusion of data processing confirmed this expectation."

The Libra production-sharing area was the first subsalt acreage sold under Brazil's production-sharing regime. The first subsalt bid round was held in 2013, with Petrobras partnering with Shell, Total, CNPC and CNOOC to snap up the sale's single block. Petrobras owns a 40% operating stake, while Shell and Total each retain 20% shares. Chinese state oil companies CNPC and CNOOC each own 10% stakes.

"Obviously we would like to have all of the areas at Libra be productive," Andre Araujo, president of Shell's Brazil operations, said in a separate webinar April 16. "But that's part of the business of risk management. It's a big area and we imagined that there would be some differentiations."

Petrobras and its partners drilled two wells in the central and southeast portions of the area, with neither yielding the type of promising results generated in the northwest part of the block that contains Mero.

The Libra block has so far yielded the Mero Field, which is expected to pump oil from the field's first dedicated floating production unit in early 2022. Output had been expected to start in the fourth quarter of 2021, but the consortium encountered coronavirus-related delays to completing construction of the FPSO Guanabara floating production, storage and offloading vessel in China, Petrobras said April 7.

The FPSO Guanabara has installed capacity to produce 180,000 b/d and process 12 million cu m/d. A total of four FPSOs are planned for Mero, which is considered the third-biggest production reservoir in Brazil's subsalt after Tupi and Buzios.

"It's a pioneer project that is very important," Araujo said.

The return was in line with the discovery evaluation plan for the 3-BRSA-1267-RJS well that was drilled in the central part of the block in 2015. The well, which was drilled just 18 kilometers from the 3-RJS-731 well that yielded the Mero Field, found a 200-meter thick column of oil. The evaluation plan covered both the central and southeast portions of the Libra block, Petrobras said.

The exploration phase of the remaining portion of the block will continue through March 2025, Petrobras said.

Peroba return

The return was also the latest in a series of underwhelming seismic surveys and drilling campaigns that underscored growing exploration uncertainties in the subsalt region after the initial wave of drilling successes unlocked the Tupi, Sapinhoa and Buzios fields. Several oil companies have drilled dry wells in high-potential acreage that generated heated bidding during auctions in 2017-2019.

The Peroba subsalt block, which was one of the highlights of the third production-sharing auction in 2017, was returned to the ANP in January. Petrobras held a 40% operating stake in the block, while BP Energy retained 40% and China's CNPC 20%. The group drilled a well at the block in February 2019, but uncovered high levels of carbon dioxide gas in the reservoir.

The block was among the most competitive of the third round, eliciting competing offers from companies such as Equinor, ExxonMobil and Shell.

The first wells drilled at the Uirapuru, Alto de Cabo Frio Oeste and Saturno blocks, which were also sold at production-sharing auctions held in 2017-2019, also failed to uncover hydrocarbons or were considered dry.

The drilling results combined with the lackluster bidding at Brazil's sixth production-sharing sale and first transfer-of-rights auction will likely help facilitate improved terms at future licensing rounds, Araujo said.

"I perceive that the government is interested in listening to companies," he said. "Companies have expressed concerns about Brazil's ability to compete in the global market, and the conditions have changed from what was seen in 2017-2019."

Brazil's Congress is currently considering several bills that could change or eliminate the production-sharing regime, while the ANP is evaluating additional regulatory adjustments. Brazil plans to hold a second transfer-of-rights auction for the Atapu and Sepia fields in the second half of 2021. In addition, a third Open Acreage auction is expected as well as the 16th Bid Round and seventh subsalt production-sharing auction, which were both delayed from 2020 by the pandemic.