Petrobras takes over BP’s stakes in basin where geologist say Guyana oil-rich play extends

Must Read

OilNOW is an online-based Information and Resource Centre

The highly prospective Foz do Amazonas region in Brazil, which is part of South America’s Equatorial Margin, is considered to hold similar geology and prospects to Guyana and West Africa. But due to ongoing environmental challenges with permits in the basin, BP has been unable to carry out operations. As a result, Brazil state oil company Petrobras said on Tuesday it has agreed to take over BP’s stakes in six offshore exploration and production blocks in the region.

According to an S&P Global Platts article, BP transferred its 30% minority stakes in the FZA-M-57, FZA-M-59, FZA-M-86, FZA-M-88, FZA-M-125 and FZA-M-127 to Petrobras. Financial details were not provided. BP had previously transferred operatorship of the FZA-M-59 block to Petrobras in October 2020.

Petrobras now owns a 100% operating stake in the blocks, which were purchased during Brazil’s 11th bid round held in 2013. Geologists at Brazil’s National Petroleum Agency, or ANP, estimated in 2013 that the area could hold as much as 14 billion barrels and 40 Tcf of natural gas in place.

“The transaction is in line with the 2021-2025 Strategic Plan, which outlined new exploratory fronts outside the Southeast basins, and is part of the company’s portfolio-management process, prioritizing investments in world-class deep-water and ultradeep-water assets,” Petrobras said.

Despite the agreement, BP still holds an ample portfolio of exploration assets in Brazil. That includes operating stakes in seven blocks, including the Pau Brasil production-sharing area.

The deal, however, also represents a rapid retreat by international oil companies from what geologists believe is one of the world’s preeminent new frontiers along South America’s northern coast.

ExxonMobil has made 18 discoveries and pumped first oil from the Stabroek Block off the coast of Guyana in December 2019. The block is estimated to hold more than 9 billion barrels of oil equivalent in recoverable reserves. According to S&P Global Platts, the same play is believed to extend along Brazil’s northern coast, especially in the Foz do Amazonas and Para-Maranhao basins, according to geologists.

Coral reef delays permits

Development of the region, however, was interrupted by the relatively recent discovery of a previously unknown coral reef in the turbid waters at the mouth of the Amazon River. Environmental groups started a public-awareness campaign aimed at halting work in the area, including pressure on Brazil’s government to prohibit drilling.

While no moratorium on drilling in the area was implemented, Brazilian federal environmental regulator IBAMA has so far declined to issue drilling permits in the region. That was the driving force behind the exit of France’s Total, which initially wanted to lead development of the area. France was designated leader of the consortium to develop five of the six blocks, holding a 40% operating stake.

Total, however, became incensed at delays in the permitting process and IBAMA’s repeated requests for additional documentation, reports and cooperation with adjacent governments that could be affected by drilling accidents. IBAMA eventually archived Total’s request to drill after it failed to submit the requested items, with the company agreeing in September 2020 to relinquish its 40% operating stakes to Petrobras.

Petrobras has decades of experience dealing with Brazilian regulators and enormous influence at the government level, which has led many industry officials to expect a quick resolution to the dispute over drilling. Petrobras also included $1 billion in investments earmarked for the Foz do Amazonas Basin and Brazil’s equatorial margin in its recently released $55 billion spending plan for 2021-2025.

But Petrobras has had little success, so far, leading to controversial comments by outgoing CEO Roberto Castello Branco in December 2020. During a webinar, Castello Branco said that Petrobras could take its investment cash to Guyana in search of deepwater treasure if permits were not forthcoming.

In addition to Petrobras, Brazilian independents Enauta and Petro Rio each own an exploration and production blocks in the Foz do Amazonas Basin. Enauta owns 100% of the FZA-M-90 block, completed a seismic survey of the block and previously opened a data room to sell a stake to a partner with deep pockets. Petro Rio, meanwhile, operates the FZA-M-254 and FZA-M-539 blocks.

Neither company has drilled in the region.

According to S&P Global Platts, the permit issues also forced the National Energy Policy Council to remove eight blocks in the adjacent Para-Maranhao Basin from Brazil’s upcoming 17th bid round, scheduled for Oct. 7. Several of the removed blocks were expected to generate heated competition despite environmental concerns because of the potential for holding deepwater deposits similar to ExxonMobil’s Stabroek Block.


Partnered Events

Latest News

Distilling Guyana’s Oil and Gas Regulatory Framework: The Introduction

By Chevy Devonish ExxonMobil Guyana Limited (ExxonMobil), and its partners Hess and CNOOC started oil and gas exploration in Guyana...

More Articles Like This