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Brazil Advances in the Shale Game


Brazil, which has dazzled the world with the discovery of billions of barrels of pre-salt oil, has now moved into the shale game that has revolutionized the United States – despite the fact that the 12th tender Nov. 28 did not attract many companies. Winning bidders included 10 power firms.

Petrobras, Brazil’s state controlled oil giant grabbed the lion’s share of the acreage buying 49 of the 72 oil and natural-gas exploration blocks that received bids, according to the National Petroleum Gas and Biofuels Agency (ANP). Petrobras retained operatorship over 43 blocks.

In Parana basin, a consortium formed by São Paulo State’s giant power utility Copel and local oil and gas players Petra Energia, Bayar, and Tucuman won four blocks.

In Reconcavo basin, France’s electricity group GDF Suez won participation in two consortia in six blocks. In the first consortium (which won five blocks), the French company teamed up with Petrobras and local Ouro Preto. In the second consortium, GDF Suez’s partnered again with Petrobras and Cowan Petroleo e Gas, which are also Brazilian.

The auction, originally planned to continue two days, ended in only three hours. ANP offered 240 onshore blocks, located in Acre, Parecis, Sao Francisco, Parana, Parnaiba, Reconcavo and Sergipe-Alagoas sedimentary basins.

Other winning bidders were: Alvopetro, Colombia; Bayar; Companhia Paranaense de Energia, Brazil; Geopark; Nova Petróleo; Petra Energia; and Trayectoria.

Shale deposits exceed Brazil’s pre-salt gas reserves, ANP head Magda Chambriard said. Brazil also holds other types of unconventional gas, such as so-called tight sands and carbon gas, according to the ANP.

At the press conference, Chambriard said that the United States, which is going through a shale gas boom, and Brazil “hold frequent talks about unconventional gas in both countries.”

Shell Brasil will drill in the state of Minas Gerais, where Petra Energia SA is becoming the leading unconventional gas explorer in Brazil, focusing on so-called tight gas sandstones and tight gas carbonates. The company said it discovered gas in 12 of 14 wells drilled in the Sao Francisco basin.

Brazil’s main source of gas imports today is Bolivia, which supplies more than one-third of its demand. The country also imports liquefied natural gas, or LNG, to process at two plants.

LNG imports reached 8.6 million cubic meters a day in 2012 and are expected to rise to about 10 million cubic meters a day in 2013, driven by demand from power plants, said José Santoro, Petrobras’ head of gas and energy.

Given the need to use gas to produce power, discovering shale gas and other unconventionals would be “ideal” for Brazil, Mauricio Tolmasquim, head of the government’s energy policy agency, or EPE, aid.

“Unconventional could be more competitive than pre-salt,” Marcelo Mendonca, an official at Gas Energy, a Brazilian consulting firm, said. “Currently our gas in Brazil is expensive so it makes all the sense to develop technologies to produce gas.”

Brazil is seeking new and cheaper sources of gas because the demand for energy is rising faster than hydroelectric dams can be built. Dams are the source of about 70 percent of the country’s electricity. Brazil uses natural gas when hydro-power reserves are low, but much of the gas used for electricity comes from high-cost offshore fields or is imported.

Onshore shale gas could increase supply and cut costs, as development of shale gas has done in the United States. High-cost gas has also hurt the country’s petrochemical industry. Brazil has a hard time competing with U.S. petrochemical companies that use natural gas as a feedstock.

However many energy experts argue that shale exploration is highly damaging to the environment. For example, the Brazilian Academy of Sciences appealed in a public letter to Brazilian President Dilma Rousseff to suspend the auction “in light of the  Brazilian government’s intention to pursue shale gas exploration.”

The Academy of Sciences argues that “although the news published by the USA International Energy Agency suggest that the occurrence of shale gas reserves is 7,35 trillions of cubic meters in the geological basins of Paraná, Parnaíba, Solimões and Amazonas, Reconcavo and São Francisco (north of Bahia state and South of Minas Gerais state)”.

“ANP estimates these reserves could double, but, it should be noted, that these forecasts are totally preliminary, especially due to the petrographic, structural and geomechanical characteristics of the geology considered in this calculation, which can decisively influence the economy of their exploitation,” it added.

Regarding risks, experts say that “in the shale gas exploitation, despite the technological and economic success presented by the United States, there are questions about the environmental risks and damages involved. While the natural gas and oil occur in specific geological structures and niches, the shale gas impregnates the whole stone or geological formation. The shale gas extraction technology is based on invasive processes on the shale gas geological layer, through the hydraulic fracturing technique with injection of water and chemicals, where it may cause spills and contamination of potable water aquifers above the shale.”

Also, the great volumes of water, needed in the extraction process, return to the surface polluted by hydrocarbons and other compounds and metals present in the stones and by the chemical additives used, require very expensive techniques of purification and for discarding final wastes. The water catchment itself may be under heavy competition with other preferential uses such as the water supply for human beings, they added.

A great part of the reserves of gas/shale oil of the Parana Basin in Brazil and part of the reserves in the north of Argentina are just below the Guarani Aquifer, the major source of high quality potable water of the South America. Therefore, the exploration of shale gas in these regions shall be carefully evaluated, since there is a potential risk of contamination of the aquifer, the Academy said.

Although the Academy of Sciences did not succeed in convincing President Rousseff to cancel the auction, several oil company executives told Rigzone, that Brazil has yet to complete rules for hydraulic fracturing.

The 240 blocks put up for bid weren’t considered prime territory by most companies. They included new areas in remote regions that are little explored and areas that have already produced oil and natural gas and may be close to depletion.

Petrobras’ aggressive tactics were a surprise given its already bloated portfolio of projects. Petrobras, which paid the auction’s largest bonus—about $6.6 million—for a single block, has seen its finances stretched by plans to spend $237 billion through 2017 to develop huge oil fields discovered off Brazil’s coast.

“It’s very difficult to compete against Petrobras,” said a spokesperson for Colombian oil producer Trayectoria Oil & Gas.

At the auction, Trayectoria won 10 blocks, which the company will evaluate for shale potential.

Brazil’s onshore oil and natural-gas potential is largely untapped, with most exploration work, since the 1970s, focused on developing offshore deposits that account for the majority of the country’s 2 million barrels a day of oil output. To make up for lost time, Latin America’s largest country will have to look for help toward the United States and Argentina, where more shale exploration is under way, analysts say.

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3 Comments on "Brazil Advances in the Shale Game"

  1. DC on Tue, 24th Dec 2013 11:37 pm 


    ‘Billions’ of pre-salt oil? You mean the billions of barrels that are still down there, and likely to stay that way for a long long time? Most of those billions will likely never see the exhaust pipe of an SUV.

  2. Oldfarmermac on Wed, 25th Dec 2013 2:55 pm 

    If the world economy doesn’t collapse first, the pre salt oil will probably be produced eventually because even at 200 dollars a barrel oil will still be a bargain compared to doing without.

    In ten years or so we will be seeing lots of hundred mpg cars- much smaller, much lighter, and powered with much improved engines.

    Two hundred dollar oil would give the world a heart attack today, but ten years from now, it will be just another chronic social health problem.We’ll learn to deal with it, after a fashion, just as we have learned to deal with hundred dollar oil today.

    I live in a relatively poor part of the US where many people drive old cars and trucks,and hardly a month goes by that I don’t notice a neighbor has given up his elderly ten to fifteen mpg pickup for a middle aged 25 mpg compact pickup or car.If gas were still in the dollar a gallon range, these old country folks would keep those old pickups running another five or ten years due to their frugal habits.

    A couple of old guys are riding scooters around the neighborhood- in the summer time-and bragging about going a couple of weeks on a gallon of gas.

    I won’t live long enough to buy one used but the mostly aluminum, carbon fiber, and plastic two seater fore and aft subcompact hybrid will be a commercial reality before 2020 and it will be a legit 100 plus mpg commuter vehicle.

    It may have only three wheels so as to enable it to be sold as a motorcycle and so skirt a few bureaucratic safety regs but it will be sold alongside cars at dealers currently selling only four wheelers.And it will be sold in large numbers.

  3. Bob Inget on Wed, 25th Dec 2013 4:41 pm 

    “To make up for lost time, Latin America’s largest country will have to look for help toward the United States and Argentina, where more shale exploration is under way”.

    Petrobras is taking heed of how YPF was
    confiscated by the Argentine government for not aggressively exploiting its shale resource.
    Political power rises and falls on the availability of liquid and gaseous fuels.
    Look no further than President Obama. Tickled Pink at rising oil and gas production in the U.S. and says so at every opportunity.

    Just imagine chaos, both economic and political had not cheaper natural
    gas come along exactly at the time it did. All those dire predictions of dollar collapse are left over from
    the period when four billion dollars
    were required to import LNG.

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