'Brazil will focus on developing its bioenergy potential'

Brazilian oil and gas services firm Ocyan stopped operating in the offshore drilling segment, which will be taken over by Foresea. 

In addition to FPSOs, subsea and offshore decommissioning, Ocyan is targeting new business fronts, especially offshore wind and bioenergy. 

In this interview with BNamericas, CEO Roberto Ramos details the plans and analyzes the market conditions in Brazil and the international context.

BNamericas: What is Ocyan's new portfolio focus after exiting the drilling rig business?

Ramos: The exit from drilling has a big impact, as there were 1,500 people associated with this area, and the turnover was very large, as was the size of the assets – five drilling units. We therefore need to reorganize the company and supplement the services we provide with others so that we can reduce the impact of the drilling company's departure. 

In the subsea area, we have a contract to remove 275km of flexible pipes used by [federal oil company] Petrobras.

BNamericas: What is Ocyan's role in this contract?

Ramos: We remove the pipelines and take them to TechnipFMC's base in Vitória, Espírito Santo, where they are cut up and sent for recycling. So our scope extends from the mobilization of the ship, which we have under lease for a period of three years. 

BNamericas: What kind of ship is this?

Ramos: It's a large supply vessel with a 300t hydraulic crane. And on its deck we have some cable reels installed. 

BNamericas: And this contract is in progress?

Ramos: We started the campaign in January this year, and the pipes are in the Campos and Potiguar basins. It's an important contract, a service with very challenging technology content which is very important to us.

BNamericas: Do you have an estimate about the flexible pipes that will need to be decommissioned in the coming years?

Ramos: It's a very large volume. Brazilian legislation requires the operator, at the end of the asset's useful life, to remove the subsea structures, leaving the seabed in the same condition as before, except for the wellhead valves, which have to remain there to prevent any kind of leak. 

Editor's note: Petrobras' strategic plan foresees the removal of 2,500km of risers and flowlines by 2027.

BNamericas: Is this part of Petrobras' so-called subsea warehouse?

Ramos: Also. Petrobras has used the seabed as a warehouse and needs to remove everything that is stored down there, not necessarily used. 

BNamericas: So the warehouse includes equipment that hasn't even been used?

Ramos: Yes.  

BNamericas: But why did Petrobras decide to do this?

Ramos: The company intended to use it, and this would prevent it from having to rent an area to store this equipment. 

We have another subsea contract that hasn't been signed yet, so we can't announce it. And there are around US$10bn worth of contracts to be awarded for decommissioning oil production facilities. 

BNamericas: That's all over Brazil?

Ramos: Yes. And there's the question of jackets [which support the fixed platforms]. I don't know if it’s been decided whether they can be left on the seabed. This is a job that would require an investment beyond the US$10bn I mentioned. 

Editor's note: Normally, equipment installed in E&P fields should be removed. However, when removal poses a significant risk to the environment or navigation, E&P contractors may request permission to leave the equipment on the seabed.

At the same time, we’re looking for other opportunities. Two areas that interest us a lot are offshore wind and bioenergy. 

In the offshore wind segment, Petrobras has taken a prominent position by making the agreement with Equinor and announcing other projects of its own. 

BNamericas: And Ocyan's interest in this area would be in the installation of turbines?

Ramos: Our first focus is the laying of the cables that interconnect each of the towers to the offshore substation and to the main cable, which brings the energy from the offshore substation to the onshore one. This laying is similar to the laying of flexible pipes [in oil and gas fields], which we know to do very well.

In addition, we’re studying the manufacture of the foundations, the steel blocks that would form the base of the wind towers, and the towers themselves, as well as the pre-assembly of the turbines for transportation and installation. This is a more specialized market, in which we could work in alliance with another company. 

We expect the first contracts to start appearing from 2027. And, as it happens, we’ll evaluate the possibility of acquiring a ship to lay submarine cables.

BNamericas: Ocyan used to have flexible pipe-laying vessels (PLSVs), but you left that market, right?

Ramos: We had two vessels in partnership with TechnipFMC, but we sold our stake to the company. 

Petrobras recently launched a tender to charter new PLSVs, and we’re evaluating the possibility of taking part. 

A few years ago, we thought there would be no room for more PLSVs in Brazil, and suddenly Petrobras is hiring PLSVs en masse, certainly taking into account that the charter price will increase. The new offshore projects in the Guianas and off the west coast of Africa will drain the installed capacity of PLSVs. Therefore, Petrobras has to ensure that it has vessels to launch lines so as not to run the risk of having the FPSO and the wells, without being able to connect them.

BNamericas: Is there a tendency for this fleet to grow?

Ramos: The number of wells drilled in the pre-salt is much lower compared to the post-salt, because production per well is much higher. On the other hand, the diameter of the pipes increases. Petrobras will therefore use fewer small PLSVs, with a capacity of 150t-200t. It's not that the entire current fleet will necessarily be renewed. There may have to be a trade-off in terms of load capacity.

BNamericas: Does this show that Petrobras will continue to work with flexible lines, but probably in combination with rigid pipelines, given the cases of corrosion seen in the past?

Ramos: The corrosion issue is surprising everyone. Flexible pipes and even the hulls of FPSOs have been affected by a level of corrosion that was not expected. In theory, the protective layer of the flexible should preserve the steel mesh. The problem is with the connectors, which don't have the polyamide layer, making them more susceptible to corrosion. Petrobras is looking for the right balance. In my opinion, the solution will be a hybrid: a little flexible, a little rigid.

BNamericas: Brazil has some important offshore gas projects planned, such as Pão de Açúcar and Sergipe deepwater. Is Ocyan also interested in laying gas pipelines? 

Ramos: The big news ahead of us is offshore wind and gas, including biogas, bioenergy. 

Brazil still consumes very little gas. There’s gas, but there is no demand for it and, as there is no demand, a lot of it is reinjected. Or we need to make more gas available to generate demand.

Brazilian gas is structurally more expensive since it’s offshore and generally associated with oil, with a high CO2 content. So it won't reach land at the cost of US gas.  

On the other hand, it’s a primary energy source that allows much more than just generating energy by burning it in a boiler. There’s the so-called methane chemistry, resulting in ammonia to make urea and methanol, as well as ethane, propane and butane, cooking gas, etc.

But this will require infrastructure for transportation. These are expensive projects. Look at the time it’s taking Petrobras to build the Rota 3 [offshore pipeline], which will only come into operation at the end of 2024, even then without its full flow. 

And there's the Sergipe deepwater project, which will have total production of around 16 million cubic meters per day, but there's no consumption for all that in the northeast. It’s therefore possible to predict that Brazil will build one or more gas liquefaction units.

BNamericas: That’s in response to the country's limited gas pipeline network? Liquefaction, in this case, would help to internalize the gas. 

Ramos: Or export it. In the northeast, there would possibly be better conditions to compete with gas from Qatar or Australia in Europe. 

Brazil's gas is available on the Atlantic and Bolivian borders. And the alternative to Bolivian gas is suffering as a result of the low level of exploration in the country, which is leaving the Gasbol [Bolivia-Brazil gas pipeline] empty. So the trend is that gas production will be distributed using biogas, obtained from the biodigestion of organic matter, such as livestock and agricultural waste, from planting dedicated organic matter or from landfills.

Biomethane [obtained from the purification of biogas] can be used to replace diesel in agricultural activity in the center-west, where there is no refinery. 

Today, Brazil produces 1 million cubic meters per day of biomethane, and [sector association] Abiogás’ projections are that this volume could reach 70Mm3/d. So there’ll be a multitude of production plants for various purposes, from a thermoelectric plant to biomethane to produce fertilizers or to inject into the gas pipeline network. 

Our challenge is to find projects large enough to interest us, starting at around 30,000m3/d. That would be a project worth around US$20mn.

BNamericas: Does this optimism about biogas persist even with the offshore gas that will start arriving in the next few years and the new LNG regasification terminals that are under construction in the country?

Ramos: These terminals will probably bring gas from the US, which is increasing its LNG export capacity, but that has a natural buyer, which is Europe.

Today, the crisis over the war in Ukraine has lost momentum because Europe has managed to maintain stocks due to a less severe winter in 2022, while increasing coal burning. But the problem has not been solved. If a harsh winter comes, the price of gas in Europe will rise, and gas from all over the world will be directed there. So I'm not convinced of the economics of bringing liquefied gas from the US to regasify in Brazil. 

I believe that Brazil will focus on developing its bioenergy potential by charging a premium for green products.

BNamericas: How is the FPSO scenario? Is Ocyan still working in partnership with Altera?

Ramos: So far we've been going together, but that doesn't mean that from now on it will always be like this. Our focus is on Brazil. Altera is a multinational. 

BNamericas: You're working together on the Papa-Terra, Pioneiro de Libra and Itajaí FPSOs, correct?

Ramos: Yes. In Papa-Terra, in addition to the FPSO, we operate a TLWP [tension leg wellhead platform], because it's a field that requires a lot of intervention. So by placing the wellhead on the surface, it's much easier to carry out maintenance.

BNamericas: And do you have any appetite for expanding this portfolio? Ocyan recently submitted a bid for the 120,000b/d Albacora FPSO. 

Ramos: The projects have increased greatly in size and price. Petrobras now has competitors in Brazil and abroad. So we're certainly interested, but this will depend on the size of each project. It's one thing to finance a US$2bn FPSO, it's another to finance two units of this size.

BNamericas: Would you prioritize smaller FPSOs, like Albacora? 

Ramos: The FPSO projects that are appearing are getting bigger and bigger, especially in Brazil. We have to be prepared for projects of any size. 

BNamericas: Perhaps with a few exceptions. Trident Energy is considering installing an FPSO in Pampo and Enchova...

Ramos: If there’s already local infrastructure, as is the case with Pampo and Enchova, then you can think about reusing an FPSO. Enauta, for example, is using the Petrojarl I [in the Atlanta early production system], which is the 'great-grandfather' of FPSOs.

But I think this niche of small and medium-sized FPSOs will cease to exist.