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Shell is confident that it can produce oil from Brazil’s promising prolific pre-salt layer for less than $40 per barrel, that’s why the supermajor is taking part in this week’s Brazilian auction, Wael Sawan, Executive Vice President Deepwater at Shell, told Reuters on Wednesday.
The pre-salt layer holds high-quality and prolific oil reserves, and recent Brazilian reforms have made them more attractive assets, Sawan told Reuters on the sidelines of an oil industry event in Rio de Janeiro. Shell believes that it can extract oil from those fields below its targeted breakeven cost of $40 a barrel, otherwise it would not have taken part in the auction, Shell’s manager noted.
“I think what Brazil really has going for it is a naturally blessed subsurface that allows it to compete with the best of what’s out there in the world,” Sawan told Reuters.
Brazil will hold on October 27 the second and third rounds of auctions for blocks in its pre-salt layer. Local oil regulator ANP said last week that it might reopen bidding for the oil blocks in the pre-salt layer that don’t receive bids in the auction.
Shell is among the oil industry’s heavyweights admitted to bidding in the auctions. But Shell’s Sawan did not elaborate on which blocks Shell would bid, or if it would do so with partners in consortia.
Shell and Brazil’s Petrobras signed last month an agreement to set up a long-term cooperation initiative to develop pre-salt fields in Brazil. Shell is a strategic partner of Petrobras in the pre-salt layer, holding minority interests in the Libra and Lula fields and in other areas such as Sapinhoá, Lapa, and Iara, all of which are located in the Santos Basin. Currently, Petrobras and Shell are partners in ten exploration and production consortia, each operating in five blocks.
Also last month, Flávio Rodrigues, the head of government relations and regulatory affairs at Shell’s Brazilian subsidiary, said that the unit would invest US$2 billion annually in Brazil by 2020, excluding investment in possible bids for new exploration areas.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.