A Norwegian Oil Company Could Play a Key Role in Brazil’s Gas Transformation

Abstract

Equinor could play a critical role in Brazil’s drive to boost its economy by opening up its gas markets. The Norwegian oil company operates two huge deepwater blocks with enough gas to lower prices in the country where big users pay some of the highest prices in the world. The development plan for one of those blocks, BM-C-33 in the Campos Basin, would deliver an average of 14 million m3/d of gas—about 15% of the country’s gas demand on a high-consumption day, which is about 92 million m3/d, based on data from Rystad. A second project in the heart of the presalt, Bacalhau, could become a model for how an international oil company can market gas successfully in the country’s richest oil play, the Santos Basin presalt. The gas potential in that play is also huge; the gas/oil ratio is high compared with other Brazilian fields but has largely been untapped. So far, Equinor and its partners in the projects have not committed to developing gas on either lease, but Equinor appears to be seriously considering doing so. The big question it needs to answer is what the gas market there will look like in a year or so. Brazil has set out to promote domestic gas supplies by ending Petrobras’ virtual monopoly in the pipeline business in favor of a less-regulated, competitive gas market. Equinor avoided gas sales at Bacalhau with an $8 billion Phase 1 plan that will use the popular practice of reinjecting produced gas. Gas reinjection maintains reservoir pressure and allows the development to comply with Brazil’s ban on routine flaring. Brazil’s energy regulator, ANP, said that when Equinor develops a plan for its second phase of development, the company needs to con-sider gas production. The role of gas market pioneer is the latest technical challenge taken on by Equinor in Brazil. Previously, it became the operator of an offshore heavy-oil field—Perigrino—and an aging giant—Roncador—both in the Campos Basin. While the Norwegian company has not promised to take on that role, it has a huge incentive to do so as the operator of Block BM-C-33, where most of the reserves are in the form of gas. The resource is estimated at 3 Tcf of gas and 700 million bbl of condensate, according to Offshore Technology. Equinor and its partners Repsol and Petrobras have developed a plan that would move the liquids by tanker from the platform, which is in water as deep as 2900 m, and build a pipeline about 200 km from there to shore. When asked about the status of the project, Geir Tungesvik, senior vice president for project development at Equinor, said the company is working to “improve the business case.” A Potential Case Study Tungesvik’s bland description fails to reflect the risks and uncertainties faced by those trying to put together offshore gas marketing plans in Brazil. If Equinor and its partners go forward with their plan to monetize that massive gas reserve, the result is likely to be a case study for those who follow. It could either be a model for successful development or a cautionary tale.