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Could shale gas in Brazil be more competitive than pre-salt oil? By Peter Howard Wertheim, peterhw@frionline.com.br

Shale deposits exceed Brazil’s so-called pre-salt gas reserves, ANP head Magda Chambriard said to reporters, in Rio de Janeiro. Brazil also holds other types of unconventional gas, such as so-called tight sands and carbon gas, according to the ANP. Pre-salt refers to Brazil’s off-shore deposits, the world’s biggest crude discoveries this century.

Shell already Brazil’s third-largest oil producer, is preparing to drill its first on-shore gas well in the second half of the year while it waits for the ANP to issue rules for the December auction, the company’s press office said.

At the press conference Chambriard told Scandoil that the US, which is going through a shale gas boom, and Brazil "hold frequent talks about unconventional gas in both countries."

Shell will drill in the state of Minas Gerais, where closely-held Petra Energia SA is becoming the leading unconventional gas explorer in Brazil, focusing on so-called tight gas sandstones and tight gas carbonates, according to an e-mailed response to questions. The company has discovered gas in 12 of 14 wells it drilled in the Sao Francisco basin.

Unconventional gas gives companies an opportunity to operate blocks in Brazil where state-run Petrobras, is guaranteed a majority stake in all pre-salt operations.

Discovered in 2007, the pre-salt reserves hold at least 50 billion barrels of oil equivalent, according to ANP. They lie below a layer of salt under the Atlantic seabed as far as 300 kilometers from the coast of Rio de Janeiro.

Brazil’s main source of gas imports today is Bolivia, which supplies more than one-third of its demand. The country also imports liquefied natural gas, or LNG, to process at two plants.

LNG imports reached 8.6 million cubic meters a day in 2012 and are expected to rise to about 10 million cubic meters a day this year, driven by demand from power plants, José Santoro, Petrobras’s head of gas and energy, told reporters.

Given the need to use gas to produce power, discovering shale gas and other unconventionals would be “ideal” for Brazil, Mauricio Tolmasquim, head of the government’s energy policy agency, or EPE, also said.

“Unconventional could be more competitive than pre-salt,” Marcelo Mendonca, an official at Gas Energy, a Brazilian consulting firm, said. “Currently our gas in Brazil is expensive so it makes all the sense to develop technologies to produce gas.”

Peter Howard Wertheim is an independent reporter based in Brazil. He can be contacted at : peterhw@frionline.com.br

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