Perenco in a long-term relationship with Brazil

About a year after acquiring the Pargo, Carapeba and Vermelho fields from Petrobras, Perenco already has managed to increase the production of the assets by more than 50%. 

Now, the French-British company is awaiting approval from national hydrocarbons regulator ANP to extend its concession contract until 2040 to invest US$200mn in the Campos basin projects. 

BNamericas spoke to Perenco’s institutional director, Leonardo Caldas, about the firm's possibilities of extending the concession for the assets even further, to 2052, which will depend on their performance, the executive said.

 

BNamericas: What are Perenco’s targets for growth in oil and gas production in Brazil?

Caldas: At present, Perenco’s domestic portfolio comprises the Pargo, Carapeba and Vermelho fields. However, the company is evaluating other opportunities related to the Petrobras divestment plan that fit into its business model. Therefore, the growth and revenue targets in the country depend on the variables associated with the new assets and the international oil price. 

Specifically regarding the Pargo hub, we plan to raise the production of the three fields to between 15,000b/d and 20,000b/d, levels that were produced in the hub prior to 2015. 

When we took over the operation of the three fields, in October 2019, their total output was less than 3,000b/d, and now it’s about 4,500b/d. In percentage terms, we’ve recorded an increase of more than 50% in one year operating in Brazil. 

BNamericas: How much does the company intend to invest in Brazil?

Caldas: We have more than US$200mn in firm commitments outlined under the Pargo development plan. This amount is basically related to the output recovery targets through improvements in the integrity and operational safety of the [production] units, pipeline infrastructure, well recovery, workover activities and the installation of an FSO [floating storage offloading unit] for the commercialization of oil as of 2022. 

However, we have to consider that the extension of the production phase of the Pargo hub until 2040 has the potential to add significant financial resources that will be used for the operation of the assets, generating royalties and tax revenues, jobs, regional economic activity and wealth for society in the process.  

BNamericas: What’s the schedule for the development activities in Pargo?

Caldas: Almost all of the investments will be made between 2020 and 2024, before the end of the original concession. Since it [the concession] involves fields auctioned off in the round zero [of the ANP bidding process], the deadline would be in 2025. 

BNamericas: Has the ANP approved the extension of the concession contract for Pargo? If so, to which year? What were the conditions imposed by the regulator?

Caldas: The extension of the concession contract is part of the development plan delivered by Perenco to ANP. In principle, the request calls for the operation of Pargo until 2040, but there is a possibility that, in the future, we could present a new request with a limit of 2052 [27 years beginning in 2025], which depends on the performance of the asset. The process is in the final stage of evaluation by the ANP and we expect to have it approved at the beginning of 2021. 

BNamericas: Which goods and services will have to be acquired? 

Caldas: Perenco relies mostly on the supplier network based in Macaé [Rio de Janeiro state] and the region. The contracts related to the daily operations of the asset have already been closed. However, the activities defined in the development plan will require new contracting of goods and services, and we will continue the strategy of prioritizing local, competitive suppliers. 

BNamericas: Is there a forecast for resuming output in the Carapeba field?

Caldas: Yes, there is. Production in Carapeba has been interrupted due to the non-operation of the pipeline that connects Carapeba to Pargo, which happened before Perenco took over operation of the asset. Included in the investments planned by the company is a project for the recovery and extension of the life of this pipeline, aiming to resume production at the beginning of 2021. This would add between 3,000b/d and 6,000b/d to the hub’s output. In 2022, we plan to replace this pipeline with a new one, which would add more volume to the production for the remaining term of the concession. 

BNamericas: How does the company intend to commercialize output from Pargo? What are the possible destinations and clients?

Caldas: At present, sales of Pargo’s output are limited under the terms of a contract signed with Petrobras before the transfer of the operation, valid until June 2021. But Perenco understands that the discount factors established in the contract are outdated and don’t match the current market conditions, which have suffered shocking changes due to the COVID-19 pandemic. So the company already is talking with Petrobras to review certain contractual terms, including extending the period of the sale contract until the arrival of the FSO. 

The possible destinations and clients will depend on the negotiations that are underway and on market conditions. We’ve been sought out by trading companies and investors interested in the acquisition of Petrobras’ refineries and which are anticipating their planning and acquisition options in consideration of the new market structure.