Brazil’s O&G offshore operators resume drilling plans

After being hit by the COVID-19 pandemic and low prices, oil and gas operators in Brazil are returning to normal E&P activities and announcing preparations for new drilling campaigns for the coming years.   

“In recent years Brazil held many auctions, several firms committed to investing and now they need to do so. The market situation is normalizing and, although prices are in a lower range, that’s not necessarily bad for exploration because costs tend to be lower as well,” Edmar Almeida, an analyst at the energy institute of Pontifícia Universidade Católica do Rio de Janeiro, told BNamericas. “It could be a good moment to start those activities.”  

This week, Murphy announced that, together with its partner Wintershall, it is analyzing seismic data on its three blocks in the Potiguar basin, targeting a late 2022 to early 2023 spudding.   

Murphy is also part of a consortium with ExxonMobil and Enauta that is expected to start a drilling campaign in the Sergipe-Alagoas basin by mid-2021. The firms have already concluded seismic analysis and are choosing the well locations.   

“Probably by this same month next year we’ll already be drilling in Sergipe-Alagoas,” Enauta CEO Lincoln Guardado commented during a conference call on Thursday.   

Enauta is also mulling drilling next year a fourth production well in its Atlanta field, in the shallow waters of the Santos basin.  

“We track the long-term scenarios for the commodity, which is what supports our investment decision,” Guardado added.   

Meanwhile, state-run Petrobras has also said that although it is not planning any new campaigns for its pre-salt blocks this year, more wells could be drilled in those areas in 2021. The firm acquired seven blocks in the Campos and Santos basins pre-salt regions as operator in the 2017-19 tenders and is expected to announce updated exploration investment plans by December.   

Also in the pre-salt region, Shell, Colombia’s state oil company Ecopetrol and Chevron confirmed this week they remain interested in the Saturno block in the Santos basin, despite the first well drilled coming out dry, which could mean plans for new drilling in the short term. Shell sees Brazil’s pre-salt as a preferred destination for investments, even amid low prices, due to its high productivity.  

“The competitiveness of a basin is very important in capital allocation not only for Shell but for any firm with a reduced budget. In that context, Brazil has a unique opportunity with the pre-salt,” Shell’s production director Cristiano Pinto da Costa said during a webinar held by Safra bank on Friday.   

The situation is similar to that in Mexico, where some delays are now giving way to a return to more normal exploration and development activities. A few larger oil E&P companies that were eyeing a 2020 start for offshore drilling campaigns have deferred plans to 2021 as part of capex cuts but firms such as Jaguar Exploración y Producción and Equinor have stepped up drilling campaigns recently.  

"Good projects are sustainable at a US$40/b range and those companies with exploration activities are now seeking those projects," Almeida said. 

Exploration in Brazil has been depressed since 2014, due not only to the drop in oil prices but also because of the financial difficulties that Petrobras has faced after serious corruption was uncovered by the Lava Jato probe. Some 208 new oil and gas wells were drilled in 2019, well below the annual average of 537 in 2010-18 and a long way from the record of 816 in 2012.  

The expectation was that domestic exploration would begin to recover in 2020, as the country made several regulatory updates in recent years that led to success in its 2017-19 tenders for exploration blocks. However, the health crisis has led regulator ANP to grant nine extra months to companies that want to extend deadlines for exploration commitments. Despite possible delays, most operators have said their long-term strategies in Brazil have not changed.