OTC Brasil 2011

Oers Fresh Perspectives Oshore

Stephen Rassenfoss, JPT/JPT Online Staff Writer

TC Brasil was born at a high point in Brazils history. Oil has a lot to do with the exuberance. Enormous reservoirs found below the thick salt layers in the Santos Basin are already adding 100,000 B/D in oil production, and are expected to play a key role in making Brazil a major exporting country. During the three-day event in Rio de Janeiro during early October, speakers at the first OTC Brasil pointed out the many factors that make the deep waters of Brazil one of the worlds most challenging offshore exploration frontiers. But in a country where the economy is booming, and a city that is preparing to host both the 2014 World Cup and the 2016 Olympics, the problems all sounded like opportunities. For the speakers who grew up in a place long described as the country of the future, the mantra was,In Brazil, the future is now. That future is also complex on many levels. More than 10,000 people at the Riocentro convention center came to learn more about the issues and connect, share ideas, and take in the exhibits of more than 400 companies in the industry. The complexities include the countrys regulatory regime, which recently was rewritten as Brazil tries to turn todays oil boom into an engine for economic change. The opening plenary session featured Magda Chambriard, director of the National Agency of Petroleum, Natural Gas and Biofuels (ANP). She gave an overview of how the goal of energy policy in Brazil has shifted from the days when the country aspired to become self-sufficient. Brazil does realize its special petroleum moment and we intend to take advantage of this moment, said Chambriard. We will have a lot of investment in research and development that will come from the signed agreements for oil exploration. Panelists analyzing the future during OTC Brasil discussed the drive by Brazils government to turn major oil discoveries into lasting prosperity, and how international energy companies and Brazilian research institutions are adapting to thesepolicies. Winners in Brazils offshore lease rounds are not based solely on the financial terms offered. Bids are also evaluated based on the local content promised. The average offer over the past 10 bidding rounds has risen from about 25% to around 90% in recent years, according to Schlumberger. Chambriard made it clear that the local content promises made during the bidding process will be scrutinized, and the agency will follow up to see if they are honored. She warned that there will be consequences for companies that promise more than they deliver. When companies have been fined, it is amazing the creativity we see, she said. The service providers

have great ideas. This is all due to the fines ANP has given for local content. Operating companies with significant operations are required to spend 1% of the value of their pre-salt production on research and development (R&D), with half of the money going to universities or research institutions. OTC Brasil offered a forum for international service providers who are rapidly expanding their presence in the country. Creating a productive R&D organization requires finding the right professors among many, and connecting them with experts in a companys global research network. It is like dating, you have to get to know people. That is how it works, said Sergio Bordalo, a professor in the Department of Petroleum Engineering at State University of Campinas (Unicamp). Companies also have an enormous need to hire talent in a country where they are trying to deliver all the equipment and services needed to find and produce oil. The Brazilian oil and gas business will need to hire 50,000 professionals this year, according to Harold Mesa, senior country manager at Halliburton in Brazil. The companys growing Brazilian operation has 18 manufacturing plants, eight offices, and six bases for staging services.

Magda Chambriard, director of the National Agency of Petroleum, Natural Gas and Biofuels ( ANP) , met with reporters after delivering an overview of the countrys pre-salt regulations during the opening session of OTC Brasil 2011.

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OTC Brasil 2011 drew more than 10,000 attendees and 400 exhibitors. Photo by Marcus Almeida/ SOMAFOTO.

Others on the panel echoed Mesas concern, pointing out that the current level of hiring is expected to continue for the next three years. The energy industry is competing with other fast-growing businesses in a country where there are not enough science and engineering majors to meet the need. Growth in Brazilian R&D employment could help fill the gap as a large number of the researchers in North America and Europe near retirement age. We, like the rest of the industry, are going through a major crew change. Brazilian universities are developing a large talent pool. The deepwater technology challenges and the access to the people who can develop the technologies are the main reasons we are in Brazil, said Ram Shenoy, vice president of research at Schlumberger.

made a large commitment on the little explored deep waters off Namibia. To establish the potential for oil, HRT tested oil that shows up in the gas production off the coast of the African country. The chemistry and origins were similar to those from the pre-salt in Brazil, as were the source rocks there. Namibia is the equivalent to Santos 20 years ago, said Nilo Chagas de Azambuja Filho, director of exploration at HRT. Petrobras and BP are also exploring in the area.

Opportunities in Technical Challenges

Technical sessions on finding and producing Brazilian oil offered a look at the obstacles facing the offshore business globally. Exploration issues ran from imaging and drilling through thick layers of salt to characterizing carbonate reservoirs and maximizing ultimate recoveries from the hard-to-analyze formations. Sessions on production technology ranged from new circular production platforms designed for greater stability to using smaller boats for lower cost interventions in deep water. With production going farther offshore in waters approaching 10,000 ft, panelists focused on subsea challenges. Flow line heating and other strategies for preventing the formation of pipeline-blocking hydrates was the topic of two technical paper sessions. It all adds up to megaprojects, which based on a study (OTC 21858) presented at the conference, are increasingly risky places to be. Independent Project Analysis studied 132 projects and concluded that 78% failed, based on its five measures of performance covering the cost, delivery time, and production problems after startup. The failure rate has gone up over the past decade, and compares poorly with the 50% rate in other industries. The typical E&P megaproject was very expensive and a good deal more expensive than planned. It was nearly a year late. Worst of all, it was frequently quite disappointing in terms of production, according to the paper by Edward W. Merrow, JPT the companys chief executive officer.

Brazils Independent Exploration Trend

Presentations by two of the countrys biggest exploration and production (E&P) newcomers, OGX and HRT, showed that in Brazil, there is an increasing local presence in the countrys E&P sector. Started within the past five years by former Petrobras exploration professionals, the two independents now claim valuations in the billions of dollars with discoveries in areas that have been little drilled. Ten years ago, there wasnt any thought of an independent in Brazil, said Ricardo Juiniti, executive manager of well operations at OGX. Brazils oil business has changed a lot. On the last day of the conference, OGX reached a milestone when its first floating production, storage, and offloading (FPSO) vessel arrived in Rio de Janeiro. The converted oil tanker will be producing oil from its discovery in the off shore Campos Basin. Others are planned in the companys aggressive plan to increase its output from 20,000 B/D this year to nearly 1.4 million B/D by the end of the decade. A theme in the technical presentations was the parallels between the west coast of Africa and the east coast of Brazil, which were once part of a single continent. Explorers are using that geologic history to use discoveries on one continent to spot opportunities on the other. OGX is drilling in the little explored coast off northeast Brazil because of parallels with fi nds off Ghana. HRT has

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