Brazil subsalt gas could cost $9/MMBtu to produce: industry exec
Rio de Janeiro (Platts)--5Mar2013/401 pm EST/2101 GMT
Brazil's subsalt natural gas could be as expensive to produce as
$9/MMBtu when it starts flowing in sizeable quantities, a leading oil
industry executive said Tuesday.
"It is gas that is difficult to produce, a long way from consumer
centers, that needs treatment," said Roberto Ramos, CEO of Odebrecht Oil &
Gas, the service company arm of Brazilian construction and engineering giant
Speaking on the sidelines of the Rio Gas Forum conference, Ramos said
that with oil and gas fields situated up to 300 kilometers (186 miles) from
the Brazilian coast, transport costs will be high, and much of the gas would
either be reinjected or used to power subsalt platforms.
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"As the volumes are very big, the gas processing installations, the gas
breakers and compressors, will be enormous. But only half of the gas will be
made available," Ramos said. "The other half has to be re-injected and
consumed by the platform. The CAPEX of the gas processing units is very high
and only half of this gas will be sold."
While $9/MMBtu is a high production price, Brazil has at times recently
paid double that for imported gas. The country went through a severe drought
late last year that cut into hydropower output, which normally provides more
than 80% of the country's power. To fuel gas-fired power generators, Brazil
has paid as much as $18/MMBtu for gas imported as LNG, a price level needed
in order to compete with demand from Japan, according to market sources.
Ramos said he was more optimistic about the onshore gas reserves Brazil
has in areas such as the Sao Francisco Basin in Minas Gerais state -- where
Petrobras, Petra Energia and Shell all have concessions.
The basin is relatively near major population and industrial centers
such as Brasilia and Belo Horizonte, but lacks infrastructure to transport
gas. "It will need to be constructed, but I think that an onshore gas line is
much cheaper than an offshore gas line," Ramos said.
Odebrecht has extensive contracts with Petrobras and is preparing to
enter into Brazil's onshore gas market as production begins to ramp up, Ramos
"We are waiting for competition to happen and the blocks be awarded, and
when this happens we are going to offer our services to the companies," Ramos
said. "We are preparing to enter the fracking market here and in Argentina."
Brazil is planning an onshore gas concessions bidding round for October
Although optimism is high for the potential of the Sao Francisco Basin,
no proven reserves figures have yet been issued. Brazil has 16 Tcf in proven
onshore gas reserves, the National Petroleum Agency, ANP, says. But Olavo
Colela Junior, an adviser to the ANP board, told Platts in November that
Brazil could have as much as 226 Tcf in total onshore unconventional reserves.
Monica Cordeiro, deputy secretary for development for the state of Minas
Gerais, said she expected stimulation tests would begin this year in the Sao
Francisco basin and that the state is "very" optimistic about reserves in the
basin and the potential for both industry and electricity generation. State
gas distribution company Gasmig, part owned by Petrobras, already supplies
more than 3 million cu m/d of gas in the state, Cordeiro said in an interview
on the sidelines of the conference.
She said the state would work to expand the gas pipeline network and
other needed infrastructure.
--Dom Phillips, firstname.lastname@example.org
--Mike Rieke, email@example.com
--Edited by Carla Bass, firstname.lastname@example.org