THE WALL STREET JOURNAL: Shell May Decide On New Brazil Oil Production in 2006: “The company will decide at earliest in 2006 whether to start production in the BC-10 exploration block in the Campos Basin off the coast of Rio de Janeiro, the vice president of exploration and production at Shell's Brazilian unit, John P. Haney said in an interview.” (ShellNews.net) 7 Dec 04
DOW JONES NEWSWIRES
December 7, 2004 6:52 a.m.
RIO DE JANEIRO -- Royal Dutch/Shell Group (RD, SC) may decide upon the start of oil production from new offshore fields in Brazil in 2006, and plans new drillings next year, but called the environment of the oil fields in question challenging.
The company will decide at earliest in 2006 whether to start production in the BC-10 exploration block in the Campos Basin off the coast of Rio de Janeiro, the vice president of exploration and production at Shell 's Brazilian unit, John P. Haney said in an interview.
As the development of new wells usually takes about three years, production in the field could start in 2009. But with an estimated 400 million barrels of oil reserves, the field is relatively small, Haney added.
Shell then will decide in 2007, whether to start production in another field, the BS-4 block in the Santos Basin off the coast of Sao Paulo state, with a possible production start in 2010. Reserves for the BS-4 block are estimated at 300 million barrels of crude.
The quality of oil found in the two blocks - the crude there is even heavier than in other fields in the Campos basin - and its location under very deep waters, however, casts doubts on a possible start of production there.
"It will be very challenging to make it economically viable," Haney said. "It won't depend on the current (oil) price, it will depend on our estimate for the next 30 years," he said, acknowledging the difficulty to forecast future oil price levels.
Crude oil found in Brazil's oil-rich Marlim Sul field, that also lies in the Campos basin, is very heavy, with a degree by the American Petroleum Institute, or API, of around 20, compared to an API of about 40 degrees for light crude. The API degree of the oil found in the BC-10 block, is even lower at about 15 degrees, indicating even heavier crude.
While heavier crude is more difficult to extract and has a lower market price, recent high oil prices have made the production of Brazilian offshore oil more profitable. Still, when compared to the oil production in other areas in the world, the extraction of crude from the new exploration blocks in Brazil is still "very frontier," Haney emphasized.
Shell has explored wells in both the BC-10 and the BS-4 block together with other oil firms, but led the exploration, with a participation of 35% and 40% respectively. Since the company started oil exploration projects in Brazil, it has participated in the drilling of 19 oil wells, eight of which where oil was found.
In mid-2003, Shell became the first foreign company to produce oil in Brazil. Having an 80% stake in a joint operation with Brazil's state oil firm Petrobras S.A. (PBR), Shell currently produces 55,000 barrels of crude per day from the Bijupira and Salema oil fields in the Campos Basin, about 140 kilometers off the coast of Macae in Rio de Janeiro state.
Shell has earmarked $125 million for exploration and production activities next year and plans to drill again in the BC-10 field in the second quarter of 2005, Haney said. He couldn't tell what the level of investments would be after that, but said it would depend on good results as Shell Brazil has to compete within the company with other oil regions of the world.
-By Bernd Radowitz, Dow Jones Newswires; (55 21) 3288 5004; bernd.radowitz@dowjones.com