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The Surprise Winners Of The Oil Price Rally

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When Will Oil Demand Begin To Taper Off?

As energy analysts begin announcing…

Pre-Salt Bonanza Begins In Brazil With First Oil Produced

Pre-Salt Bonanza Begins In Brazil With First Oil Produced

The Brazilian pre-salt bonanza has now officially begun, with Norway’s Statoil and partners announcing production of the first oil and gas from the offshore Gavea field in Brazil—part of the largest-ever oil and gas discovery in the Campos Basin’s pre-salt layer.

The project is controlled by state-run Petrobras, but Statoil holds a 35 percent interest and will assume the role of operator later this year, while other partners include Spain’s Repsol and Chinese Sinopec.

Statoil said the test well drilled on the site was at a depth of 6,230 meters, and when tests were launched it produced 4,000 barrels of crude per day and 16 million standard cubic feet of natural gas. It’s quite a promising result in what is considered Brazil’s richest oil and gas area.

Related: Why Doha Was Just A Show

Pre-salt oil and gas deposits are attractive because wells in this layer tend to yield more crude oil than other offshore wells. However, they are also much deeper than other wells, so pre-salt projects tend to be cost-intensive and challenging—particularly in a depressed oil price environment.

Enter Statoil, which, aside from new exploration projects, has also been working on new technology aimed at reducing exploration and production costs without harming operating efficiency.

A day after it announced the first output from Gavea, Statoil reported on the presentation of a new subsea concept template that is smaller than traditional ones, more cost-efficient, and quicker to produce. Subsea templates are used as foundations for wells and other exploration and production structures, so they are essential in offshore oil production.

Related: Canada’s Oil Industry To See 62% Decline In Investment

A day earlier, the company announced a partnership that will focus on the development of subsea maintenance and monitoring robots.

The Cap-X, exciting as it looks, was developed for shallower waters than the Brazilian pre-salt, however. It is to be used in the Barents Sea, where half of Norway’s still untapped oil and gas reserves lay. These reserves, by the way, have been estimated at some 3 billion standard cubic meters of oil and gas (around 18 billion boe). So, what’s Statoil doing in Brazil, if it’s got enough to do in home waters?

Well, producing oil in the Norwegian continental shelf is a costly activity—Norway has the highest carbon tax among oil-producing countries and the fourth-highest in the world, and that’s not even considering the higher production costs for oil companies operating in the North Sea. Labor costs are also significantly higher than in other parts of the world. In short, it’s too expensive for Statoil to confine itself to home operations.

Related: Oil Back On Track As Markets Dismiss Doha

Brazil is a priority area for the company, in keeping with its long-term plans for production expansion. The pre-salt is especially attractive because of the higher average yields, and given the technical prowess of the Norwegian company, it was a natural choice.

Statoil and its partners in Gavea have not yet made a final decision on how to proceed. First, they said, they will have to review and evaluate the test well results. Then they will choose the best method of pumping the oil and gas in a cost-efficient manner. It’s all about cost efficiency these days in energy, and Statoil knows about it perhaps more than most of its peers.

By Irina Slav for Oilprice.com

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