Giant Libra pre-salt rights awarded offshore Brazil Peter Howard Wertheim

Only one consortium of 11 registered bid for a 35-year production-sharing contract to develop the Libra pre-salt oil discovery in the Santos basin offshore Brazil.Libra is estimated to have fro 8 billion to 12 billion bbl of recoverable oil.

Petrobras will be the operator by law and have an automatic 30 percent stake also by law plus the 10 percent of the consortium.

Brazil’s Petrobras, Royal Dutch Shell PLC (20 percent), Total SA (20 percent), China National Petroleum Corp., (10 percent) and China National Offshore Oil Corp. (10 percent) comprise the group of companies that will attempt to recover 8-12 billion bbl of oil, as estimated by Brazil’s National Petroleum Agency (ANP). In 2010, ANP initially estimated the Libra discovery could hold as much as 15 billion bbl of oil, more than 2.4 billion bbl greater than the country’s existing reserves.

The ultradeepwater Libra accumulation, one of the largest in the world, is 105 miles off Rio de Janeiro. The block covers 1,550 sq km in 2,000 m of water. The reservoir depth is 3,500 m below the seafloor. ANP estimates that total gross peak oil production could reach 1.4 million b/d.

The PSC is expected to be signed in November. As part of the winning bid, Shell said it will pay its 20% share of the total signing bonus of $1.4 billion and fulfill the minimum work program no later than yearend 2017.

Shell has worked in Brazil for more than a century, with 65,000 boe/d of operated production in 2012. Shell is currently operating two floating, production, storage, and offloading vessels off Brazil—the Espirito Santo at Parque das Conchas and the Fluminense at the Bijupira/Salema fields—and has recently announced projects to expand production at both fields. Shell also operates and owns an 80% interest in the BM-S-54 block, where the Gato do Mato discovery is being appraised.

Petrobas holds 40% in the consortium and serves as operator; other partnership interests are Shell 20%, Total 20%, CNPC 10%, and CNOOC 10%. The winning consortium offered 41.65% of the profit oil for the Federal Government. This percentage relates to the surplus in oil to be paid under a reference scenario of an oil price between $100.01 and $120.00 per barrel of oil and production per active producing well of between 10,000 and 12,000 barrels per day. This percentage will vary in accordance to international oil price and well productivity, as set forth in the table provided by ANP.

A signature bonus of R$ 15 billion is to be paid by the winning consortium in a single payment. Hence, the total amount payable by Petrobras is R$ 6 billion relative to its participation in the consortium.

The contract states that the exploration phase of the block will have duration of four years. The minimum exploratory program, to be carried out during this period, includes 3D seismic for the whole block, 2 exploratory wells and 1 extended well test.

There are minimum local content requirements to be carried out in each phase of the project. For the exploration phase the minimum percentage of overall local content is 37%, in the development stage this percentage is 55% for systems with first oil until 2021 and 59% for those after 2022.

The Libra block is located in Santos Basin ultra deep waters in the pre-salt polygon and is considered a prospect of high potential. The total extension of the area is 1,547.76 km2 and was discovered by well 2-ANP-0002ARJS, drilled in 2010.

Petrobras highlights that recoverable oil volume estimates, costs, investments and schedule of the production systems of this block, will be progressively released in a timely manner, as the minimum exploration program is developed.

Peter Howard Wertheim is an independent journalist base in Rio de Janeiro, Brazil. Contact: peterhw@frionline.com.br

Tags: Petrobras