E&P | T&D |
BG Group is building a significant business in Brazil through oil and gas reserves in the Santos Basin and via growth of its gas distribution business, Comgás. Brazil is a key growth asset in the Group portfolio, offering significant reserves, ease of access to world crude markets, and a growing domestic gas market.
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* Based on BG Group estimates
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Key dates
1999
Purchased controlling stake in Comgás
2000
Acquired pre-salt non-operated acreage in Santos Basin
2005
Drilling programme began in deep water Santos Basin
2006
Lula (BM-S-11) oil and gas discovery made in the Santos Basin
2008
Guará announced as an oil discovery on BM-S-9
Iara announced as a material oil discovery on BM-S-11
BG Group supplied first LNG to Brazil
BG Group has interests in five blocks in the Santos Basin, offshore Brazil. The exploration success and scale of resources discovered in the Santos Basin to date have been exceptional. BG Group is building a significant business in Brazil through oil and gas reserves and via growth of its gas distribution business, Companhia de Gás de São Paulo (Comgás).
Following further reservoir modelling and analyses, increases in resources estimates and the proposed schedule of production capacity, BG Group's view, as at February 2011, is that its interests in Brazil will support net production levels above 550 000 barrels of oil equivalent per day (boed) by 2020 – a significant increase on the level of 400 000 boed previously expected.
BG Group has a controlling stake in Comgás, Brazil's largest gas distribution company. As at June 2011, Comgás served close to 800 000 customers in São Paulo. The concession area has a population of over 29 million and Comgás anticipates continued growth in gas penetration in the future.
Other important areas for BG Group's future business in Brazil include: development of oil and gas infrastructure associated with production from the Santos Basin (with the potential to supply the Brazilian market); supply of imported LNG to the local market; and further exploration.
Excellent progress has been made with BG Group's Santos Basin interests. There has been a second material upgrade* to gross resource estimates; production has commenced from the first permanent floating production, storage and offloading vessel (FPSO) on Lula; and the consortium is progressing the contracting of a further 12 FPSOs.
In June 2011, BG Group issued a material reserves and resources upgrade* for its interests in the pre-salt Santos Basin. Mean total reserves and resources are now estimated to amount to some 6 billion barrels of oil equivalent (boe) net to BG Group, with an upside potential of 8 billion boe net.
The mean total reserves and resources represents a doubling of BG Group's previous best estimate of 3 billion boe prevailing at the time of the Group's February 2010 Strategy Presentation. The aggregate range of total reserves and resources net to BG Group is from 4 billion boe (P90) to 8 billion boe (P10).
The Lula, Guará, Cernambi, Iara and Carioca fields account for 95% of BG Group's total reserves and resources in the Santos Basin.
BG Group's new estimates are based on analysis of a wealth of drilling and appraisal data that has been gained in the Santos Basin, including:
- 29 wells drilled in existing discoveries;
- 19 drill stem tests (DSTs) on current discoveries;
- shooting and analysis of over 14 400 square kilometres of 3D seismic;
- analysis of the extended well test (EWT) on Lula South and early results from the Guará EWT;
- production from the first permanent FPSO on Lula;
- development plans that include enhanced recovery processes to improve ultimate recovery factors; and
- cost optimisation, potential de-bottlenecking of facilities and greater well productivity.
Significantly, BG Group expects that virtually all of the additional resources announced in June 2011, contained within the Lula, Guará, Cernambi, Iara and Carioca fields, will be recovered from the same surface facilities envisaged in BG Group's field development plan prior to the resources upgrade.
The incremental volumes are thus of a substantially higher value and are expected to result in significant unit cost reductions and higher unit value for the now increased total resources base.
In December 2010, BG Group provided additional data* on operational and capital costs. This cost update related to the first two FPSOs on the Lula field and the first FPSO on the Guará field. These three FPSOs are expected to recover total gross reserves of approximately 2.2 billion boe – approximately 600 mmboe net to BG Group – within the concession periods, utilising a total of approximately 40 production and injection wells. In light of the outstanding reservoir characteristics and high recovery per well, BG Group anticipates very low unit technical costs for this initial phase of development, amounting to: capital costs of $5/boe and operating costs of $9/boe.
BM-S-9
In 2007, the Carioca well on BM-S-9 (BG Group 30%) was declared a discovery and the Guará well was announced as a discovery in 2008. Since the initial discoveries there have been further drilling successes including: Iguaçu, Abaré West, Guará Norte, Carioca North-East and Guará Sul.
The exploration success with Guará has led the partnership to fast-track a 120 000 bopd and 177 mmscfd FPSO initial development phase, with the objective of achieving first production in 2013. Further development phases on Guará are expected to lead to additional production capacity of up to 150 000 bopd oil and 212 mmscfd gas. An EWT commenced on Guará in December 2010 and was completed at the end of July 2011.
The Carioca North-East well was announced as a discovery in early 2011. The well discovered light oil, nine kilometres north-east of the original Carioca discovery well. An EWT will follow later in 2011. The Carioca Sela appraisal well is also planned for later in 2011.
BM-S-10
In 2006, the Parati well in BM-S-10 (BG Group 25%) was declared a discovery. A second well, Macunaíma, was declared a discovery in February 2011. Further evaluation of this discovery continues.
BM-S-11
Lula and Cernambi
Lula and Cernambi in BM-S-11 (BG Group 25%) are very large structures with significant reserves potential. The Lula discovery well was drilled in 2006 and the Cernambi discovery well which confirmed the presence of light oil in the north-west of the evaluation plan area was drilled in 2009.
There has been significant activity on Lula and Cernambi since the original discoveries were made including appraisal wells, DSTs, EWTs and the start-up of the first permanent production facility. The first EWT on Lula flowed first oil in May 2009 and completed operations in December 2010. A second EWT on Lula North-East commenced operations in April 2011. The Lula North-East EWT is utilising the BW Cidade de São Vicente FPSO. Current gross production has peaked at 18 000 bopd, constrained by facilities.
In October 2010, BG Group announced that production from the first permanent FPSO on the Lula field had commenced. The Cidade de Angra dos Reis FPSO, which is initially connected to Lula-P1, is expected to produce up to 100 000 bopd oil and up to 177 mmscfd gas.
In December 2010, BG Group announced that its partner Petrobras, as the operator of block BM-S-11, filed the Declaration of Commerciality (DoC) with the Brazilian National Agency of Petroleum, Natural Gas and Biofuels for the accumulations of light oil and gas in the Lula and Cernambi areas. The DoC is another significant milestone in the development of the Group's substantial interests in the region, marking the start of the commercial production phase for the fields and setting the licence period to run to 2037.
Iara
In 2008, BG Group announced the completion of drilling on the Iara well also in the BM-S-11 concession on a step-out block. In March 2011, BG Group announced the successful completion of drilling on the Iara Horst well. The well encountered good quality oil in a thick reservoir section. Initial results from Iara Horst have demonstrated superior reservoir characteristics to the discovery well located around eight kilometres away. A DST, completed in April 2011, confirmed reservoir quality and well productivity. Further evaluation activity continues, including a third appraisal well late in 2011 and an EWT is planned for 2013.
BM-S-50 and BM-S-52
An exploration well is planned for early 2012 on Sagittario (BM-S-50). On BM-S-52, BG Group has a 40% interest in the concession. Two exploration wells were drilled in 2009. The first, Corcovado-1, encountered hydrocarbons in April 2009. The rig then went on to drill a second well, Corcovado-2. The partners are progressing with the evaluation of these results.
FPSOs
BG Group is progressing the contracting of a further 12 FPSOs, four leased and eight owned, in addition to the one currently producing on Lula. These are due to come onstream progressively over the period to 2017, to yield a total scheduled production capacity of approximately 2.3 million boed.
Oil evacuation
During the second quarter of 2011, BG Group took delivery of the oil tanker Windsor Knutsen, which is being used to transport BG Group's equity oil from Brazil. The Windsor Knutsen was converted from a conventional Suezmax tanker into the world's largest shuttle tanker, with the capacity to hold 1.1 million barrels of crude oil. First crude oil from the Lula FPSO was lifted in July 2011 and delivered in August 2011. BG Group has also committed to charter four further Suezmax shuttle tankers which are expected to be delivered in the period 2013 to 2014.
Gas evacuation
Development plans for the associated gas resources in the Group's Santos Basin interests have continued to advance. To evacuate the gas from Lula and across the Santos Basin, the partners are considering different options.
In 2010, a new pipeline was installed connecting the Lula field to the Mexilhão gas hub. This pipeline has the capacity for three FPSOs and further pipelines to other areas are under study, the first being planned for start-up in 2014.
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Block |
BG Group % |
Partners % |
Wells/prospects |
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BM-S-9 |
30 |
Petrobras 45, Repsol YPF Brasil S.A. 25 |
Carioca, Guará,
Abaré West, Iguaçu |
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BM-S-10 |
25 |
Petrobras 65, Partex 10 |
Parati, Macunaíma |
|
BM-S-11 |
25 |
Petrobras 65, Petrogal 10 |
Lula, Cernambi, Iara |
|
BM-S-50 |
20 |
Petrobras 60, Repsol YPF Brasil S.A. 20 |
Sagittario |
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BM-S-52 |
40 |
Petrobras 60 |
Corcovado |
* Based on BG Group estimates
Bolivia-Brazil pipeline
With a total capacity of 30 mmcmd, the Bolivia-Brazil pipeline is 3 150 kilometres long. Construction of the pipeline was completed in 2000, opening the Brazilian energy market to Bolivian gas reserves. The project was developed through two different companies: Gas Transboliviano (GTB), which owns and operates the 557 kilometres of pipeline in Bolivia, and Transportadora Brasileira Gasoduto Bolivia Brasil (TBG), which owns and operates the 2 593 kilometres in Brazil. Operation of the two pipelines is coordinated through an Interconnection Agreement. BG Group participates in TBG through BBPP Holdings, together with El Paso and Total. BG Group's one-third equity in BBPP Holdings represents a 9.67% interest in TBG. BG Group holds a 2% interest in GTB.
Comgás
BG Group has a 60.1% majority interest in Comgás, Brazil's largest gas distribution company. Comgás is listed on the São Paulo stock exchange.
In 2010, Comgás added more than 100 000 connections to Brazilian households and as at end June 2011 had served close to 800 000 customers. At end June 2011, Comgás had 7 365 kilometres of pipelines covering 68 municipalities (of 177 in the concession area) and supplied gas to nearly 1 000 industrial, over 10 000 commercial and over 780 000 residential customers in the state of São Paulo.
Additionally, Comgás supplied over 360 natural gas vehicle (NGV) filling stations and customers in co-generation and the thermo-generation market. Comgás average daily volume was 13.3 mmcmd in first half 2011.
The Comgás concession is a 30-year franchise, with potential for a further 20 years. The concession area is in the industrial heartland of Brazil, accounting for over 25% of Brazil's GDP. The current business focus continues to be the connection of higher-margin commercial and residential customers.
The concession contract requires a tariff review every five years. In May 2009, the regulator, ARSESP, published the details of the outcome of Comgás' tariff review covering the period 2009-2014. The tariff review resulted in some reductions in Comgás' margins, mainly reflecting the pass through of reduced costs of gas and some reduction of the maximum allowed margin. As a result of the reduction, competitiveness of natural gas is expected to improve.
Comgás purchases gas at prices indexed to a basket of oil-related fuels. Brazilian gas supplies from Petrobras of 4.15 mmcmd are contracted until December 2013. Bolivian gas supplies from Petrobras began in July 1999 under a 20-year contract with volumes currently set at 8.10 mmcmd. Comgás has two further gas supply contracts with Petrobras: a firm energy contract (1.0 mmcmd) and an interruptible contract (up to 2.9 mmcmd until November 2011).
As of June 2011, total volumes of 2.4 bcm were 5% higher than the same period in the previous year. Volumes have benefitted from a positive performance in all segments except for Power and NGV.