Shell Drills New Well at Brazilian Field to Maintain Output

Santos Basin, Campos Basin
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DUBAI, Apr 17, 2007 (Dow Jones News)

Royal Dutch Shell PLC (RDSB) has drilled a new production well at its Bijupira and Salema oil fields in the Campos Basin, John Haney, vice president of exploration and production at Shell's Brazilian unit, said Monday.

"We're trying to manage the natural decline at the field," Haney told Dow Jones Newswires in an interview during the Vitoria Oil and Gas conference that started here Monday and lasts through Wednesday.

Shell also stimulated production at the wells, a move that was very successful, Haney said.

Through these moves, the company was able to maintain production at the twin fields in Brazil's Campos Basin at 35,000 barrels of oil a day. The company now has a total of 10 production wells operating at Bijupira and Salema, Haney said.

Shell has an 80% operating stake in the fields, and Brazil's state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, holds the other 20%.

Until recently, Shell was the only foreign firm producing oil in Brazil.

Spanish-Argentine oil firm Repsol YPF (REP) a year ago became the second foreign firm to produce oil in the country with its 10% participation in the 180,000-barrels-a-day Albacora Leste field. Petrobras holds the other 90% in that field.

Foreign oil companies are expected to boost their oil production in Brazil in coming years, and should add more than 300,000 barrels a day in new production to Brazil's oil output by 2010.

Haney said it was very encouraging that more foreign oil firms are starting to produce oil in Brazil.

"It's good to see that we're going to have an industry here in addition to Petrobras," Haney said, adding that Shell hopes to be able to share some of the development costs it has so far had to bear alone.

A possibility for cooperation would be to share exploration rigs, he added.

Shell has stakes in another 13 exploration blocks in Brazil. These are at various stages of development.

The company is currently drilling an exploration well in the Shell-operated BMS-31 block in the Santos Basin, in which Maersk is a partner.

Later this year, Shell will participate in the drilling of an exploration well in the ultra-deep sub-salt layer of the BMS-8 block, also in the Santos Basin. Petrobras is a partner.

Shell also has a 50% operating stake in Brazil's BC-10 block, which was declared commercial in December 2005. That block is located in depths ranging from 1,500 to 2,000 meters, about 120 kilometers southeast of the city of Vitoria in Espirito Santo state, just north of Rio de Janeiro state.

"We're moving ahead on schedule (with the BC-10) and (will) start drilling at the end of this year," Haney said.

Shell has previously said that field could produce about 100,000 barrels of oil a day, and has estimated that it has 400 million barrels of potential oil reserves.

At the end of 2006, Shell also declared two areas within the BS-4 block in the Santos Basin commercially viable. The field is located at a depth of 1,550 meters in the Santos Basin, 185 kilometers off the coast of Rio de Janeiro.

"We're preparing a development plan for that," Haney said. "It's very challenging technologically." He said the deep-water location and the heavy density of the oil makes production more difficult.

Oil at the BS-4 block registers 14 to 15 degrees on the scale of the American Petroleum Institute, or API, a sign of very heavy oil. Shell and its partners are currently deciding whether oil produced from the field will need to be pretreated before reaching refineries.

Shell is the lead operator of the block with a 40% stake. Petrobras holds 40% and Chevron Corp. (CVX) the remaining 20%.

Although heavier crude is more difficult to extract and has a lower market price, recent high oil prices have made the production of Brazilian heavy offshore oil more promising.

Shell so far didn't say when it expects the BS-4 field to start producing, nor did it give details of how much oil could be produced from it. The field has estimated reserves of about 300 million barrels of very heavy crude.

Copyright (c) 2007 Dow Jones & Company, Inc.

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