Brazil’s offshore boom

 By Peter Ward

Brazil is about to become a much bigger player in the oil and gas world. The South American country is leading the world in terms of planned offshore projects, ahead of the likes of the U.S. and the U.K. Why is the country’s offshore industry expanding so fast…?

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Brazil has a total of 40 development scheduled to start operation by 2025, according to research and consulting firm GlobalData. That figure is way ahead of the next most active countries — the U.K., which has 29 planned projects and the U.S. with 21 projects.

Across the word there are 236 projects planned, expected to contribute an extra 6.8 million barrels of oil per day and 36.3 billion cubic feet of natural gas per day in 2025. “The offshore commercial reserves in Brazil are second only to Russia, Iran and Mozambique. GlobalData’s analysis shows there are an estimated 13.3 billion barrels of commercially recoverable reserves from announced projects in offshore Brazil. To put this in perspective, planned offshore projects in Norway, United States, United Kingdom and Nigeria total 12.9 billion barrels of commercially recoverable reserves altogether,” Matthew Jurecky, GlobalData’s Head of Oil & Gas Research and Consulting, said in a press release.

Brazil is also leading the way in terms of capital investment over the same period. There will be $116.2 billion worth of investment up until 2025. Petrobas, the state-owned oil company in Brazil, is forecasted to spend $90.9 billion on projects over the next 10 years.

Source: Petrobras

One of the main reasons behind Brazil’s offshore boom is the pre-salt, a sequence of sedimentary rocks formed more than 100 million years ago, in a space created by the separation of the ancient continent of Gondwana. The area which has the potential for oil in the pre-salt layer is approximately 800 km in length and 200 km in width, and is located off the coast between the states of Santa Catarina and Espirito Santo. The total area of the pre-salt province is 149,000 square kilometers, an area almost three and a half times the size of the state of Ro de Janeiro, according to Petrobas.

Until recently, Brazil’s government has insisted that Petrobas is a participating partner in all pre-salt project areas, but in October the Brazilian Parliament passed legislation that allows international exploration and production companies to bid for pre-sale oil developments.

Adrian Lara, GlobalData’s Senior Upstream Analyst covering the Americas, said in a webinar: “Brazil’s pre-salt was a game-changer which the government tried to protect, but after being hit by political and corruption scandals on top of economic recession, a clear opportunity has emerged where international oil companies can play a more central role in a more balanced regulatory environment – but the political trade-offs to allow this will be challenging.” Wood Mackenzie, an energy consultancy firm, said in its global upstream outlook for 2017that Brazil’s pre-salt would be one of the two hot oil plays for development this years. The other was the Permian Basin in the U.S.

SEE MORE: Offshore Life by Marco Alfieri

about the author
Peter Ward
Business and technology reporter based in New York. MA in Business Journalism at Columbia University Journalism School 2013. Five years experience reporting in the U.S., the U.K., and the Middle East.