Exploration | Bolivia-Brazil Pipeline | Comgas | Other Business | Operations Map
Brazil is the central part of BG Group’s South America strategy. 2007 was a pivotal year for BG Group in Brazil, with significant drilling success in the Santos Basin where the Group has seven offshore exploration licences. In 2008, BG Group encountered two new discoveries: Guara on BM-S-9 and Iara on BM-S-11, extending its drilling success in the pre-salt play in this basin. The Group also has one licence onshore (in São Francisco Basin, Minas Gerais State).
BG Group has a controlling stake in Companhia de Gás de Sâo Paulo (Comgas), Brazil’s largest gas distribution company. Comgas has over 570 000 customers in São Paulo. The concession area has a population of over 29 million and Comgas anticipates continued growth opportunities in future.
BG Group has an equity position in the Bolivia-Brazil Pipeline (BBP).
Key dates
1999
Purchased controlling stake in Comgas
Bolivia-Brazil pipeline connected to São Paulo
2000
Acquired pre-salt non-operated acreage in Santos Basin
2002
Seismic acquisition in pre-salt blocks (Santos Basin)
2005
Drilling programme began in deep water Santos Basin
2006
Secured ten new exploration blocks in the ANP 7th licensing round now consolidated into four new licences. Initial oil and gas discoveries in the Santos Basin – Parati (BM-S-10) and Tupi (BM-S-11)
2007
Further discoveries were announced: Carioca (BM-S-9) and Tupi Sul (BM-S-11)
2008
Guará announced as the second oil discovery on BM-S-9
Iara announced as a material oil discovery on BM-S-11
In 2003, BG Group entered the Second Exploration Period for the non-operated BM-S-9, 10 and 11 blocks in the deep water Santos Basin (greater than 2 000 metres water depth). In 2006, the Parati well in BM-S-10 (BG Group 25%) and the Tupi well in BM-S-11 (BG Group 25%) were both declared as discoveries. In 2007, the Carioca well on BM-S-9 (BG Group 30%) was declared a discovery and the Tupi appraisal well, Tupi Sul (BM-S-11), confirmed the 2006 Tupi discovery.
Tupi is a large structure with significant reserves potential requiring further appraisal drilling and evaluation. Initial estimates by BG Group are that Tupi could contain from 12 billion boe to more than 30 billion boe gross hydrocarbons initially in place. Commercialisation of the Tupi discovery is receiving highest priority by BG Group and operator Petrobras. Implementation of an extended well test (EWT) as well as a Pilot Project were sanctioned in 2008. The Tupi consortium is currently undertaking further evaluation of the field under an Evaluation Plan approved by the National Petroleum Agency of Brazil (ANP). Initial production from the EWT is expected in 2009 with gross production of 10-20 000 bopd. A pilot production project is expected to commence in late 2010, with initial production estimated to be up to 100 000 bopd.
In April 2008, operator Petrobras contracted three sixth generation rigs from Seadrill, which should guarantee availability of rig capacity to drill and complete the anticipated eight additional Tupi Pilot Project wells, as well as several appraisal wells on the Carioca, Guará and Iara discoveries, by 2011.
In BM-S-9, the Guará well was announced as a discovery in June 2008, the second one within this concession area. In September 2008, BG Group announced the completion of drilling on the Iara well in the BM-S-11 concession and estimated gross recoverable volumes to be 3-4 billion boe. Evaluation Plans for the Carioca and Guará discoveries have been approved by the regulator ANP and the Evaluation Plan for Iara is expected to be filed during fourth quarter 2008.
In July 2004, BG Group acquired a 100% operated interest in the BM-S-13 exploration block in the shallow water (100 – 200 metres water depth) Santos Basin. In 2005, Repsol farmed into BM-S-13 for a 40% interest. In May 2006, BG Group completed its first two operated wells in the block and in September, BG Group entered the third and final two year Exploration Period and acquired 3D seismic to fulfil the commitments.
In October 2005, BG Group’s exploration portfolio was further extended following success in the 7th Annual Brazil licensing round. Three licences were awarded in the offshore Santos Basin (BM-S-47, BM-S-50 and BM-S-52) and one onshore licence was awarded in the São Francisco Basin in Minas Gerais State (BT-SF-2).
The Saleta B Deep well (post-salt gas; BM-S-47, BG Group 50%) reached Total Depth in April 2008. BG Group has a further two commitment wells to drill as part of the BM-S-47 licence and is currently assessing further prospects.
BG Group anticipates drilling to commence on the Corcovado complex (BM-S-52; BG Group 40% and operator) in first quarter 2009.
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| Bolivia-Brazil Pipeline (BTB) |
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With total capacity of 30 mmcmd, the BTB is 3 150 kilometres long, of which 2 593 kilometres is in Brazil. The project was developed through two different companies: Gas Transboliviano (GTB), which owns and operates the assets in Bolivia, and Transportadora Brasileira Gasoduto Bolivia Brasil (TBG), which owns and operates the Brazilian portion of the pipeline. Operation of the two pipelines is co-ordinated 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. BG Group has an effective overall interest of 7.65%, although this does not represent a direct equity holding, as GTB and TBG are two separate entities. Construction of the pipeline was completed in 2000, opening the Brazilian energy market to Bolivian gas reserves.
Summary of Comgas 2007 results:
- 6.5% increase in the total volume of gas sales
- 5.7% increase in industrial segment sales
- 8.8% increase in gas sales to natural gas vehicle (NGV) market
- 535 kilometres of network expansion
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Comgas |
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BG Group has a majority interest in Comgas, Brazil’s largest gas distribution company. Comgas is listed on the São Paulo stock exchange with a free float of 21.8%.
At end 2007, Comgas had 5 255 kilometres of pipelines covering 66 municipalities and supplied gas to 989 industrial, 8 563 commercial and 562 175 residential customers in the state of São Paulo. Additionally, Comgas supplied 384 NGV filling stations and 18 customers in the thermo generation and co-generation market. Comgas has increased its average daily volume from 3.0 mmcmd in 1999 to 13.9 mmcmd in 2007.
Comgas increased its total net income by 3.7% to BRL 443 million in 2007 and invested BRL 397 million.
BG Group and Shell have been the majority shareholders in Comgas since April 1999, when the state-owned power generation utility, Companhia Energética São Paulo, sold its controlling stake in Comgas. Integral Investments paid BRL 1 653 million (US$988 million) for 62.7% of the company, which in turn was controlled by BG São Paulo Investments B.V. (96%) and Shell Gas B.V. (4%). Shell incorporated part of its previously held direct shareholding in Comgas into the controlling consortium. After execution of the Shareholders’ Agreement, Integral Investments holds 71.9% of the company, in which BG São Paulo Investments B.V. and Shell Gas B.V. hold 83.5% and 16.5%, respectively.
The Comgas concession is a 30 year franchise, with a potential for a further 20 years. The concession area contains 7.7 million households and is in the industrial heartland of Brazil, accounting for about 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. The first, concluded in 2004, defined the overall level and structure of tariffs for the period June 2004 to May 2009, and allows Comgas to make sufficient return to support further investment and growth in the business. Since this review, Comgas has invested approximately BRL 1.5 billion.
Comgas purchases gas at prices indexed to a basket of oil-related fuels. Brazilian gas supplies from Petrobras of 3.5 mmcmd are contracted until December 2012. Bolivian gas supplies from Petrobras began in July 1999 under a 20 year contract, with volume increasing from 4.0 mmcmd in 1999 to 8.7 mmcmd in 2007 and are contracted until July 2019. Comgas has two further gas supply contracts with Petrobras: a firm energy contract (1.0 mmcmd until December 2012) and an interruptible contract (up to 1.5 mmcmd until December 2010).
On 15 May 2008, a new supply agreement for 0.65 mmcmd was agreed between BG Group’s gas marketing arm, BG Comercio, and Comgas to replace an earlier agreement that needed to be restructured as a result of changes to the Bolivian regulatory regime.
| Financial and Operating Summary - Comgas |
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2007 |
2006 |
2005 |
| Revenue (£million) |
810.4 |
738.6 |
532.0 |
| EBIT (£million) |
206.9 |
186.2 |
147.0 |
| Customers at year end ('000) |
572 |
517 |
485 |
| Sales Volumes (mmcm) |
5 032 |
4 773 |
4 346 |
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Iqara natural gas filling station |
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Iqara Gas Natural, launched in 2001, provided compression services to the rapidly growing Brazilian NGV market. Iqara Gas Natural was sold in July 2008 to Dickens Investments LLC, a US subsidiary of the Natixis private equity company. At the time of sale, there were 61 Iqara Gas Natural CNG service stations, primarily located in the states of Rio de Janeiro and São Paulo.
BG Group, through Iqara Energy Services, has provided energy solutions (co-generation, peak shaving electric power generation, chilling and heat generation) tailored to clients’ specific needs using natural gas as the primary fuel. By the end of June 2008, a total equivalent to 22.2 MW were in operation and another 27.2 MW were under construction. In July 2008, BG Group sold Iqara Energy Services to Ecogen, (a holding company set up by Geriba Investimentos, a Brazilian private equity group, and Iqara management).