Of the 33 oil finds reported to hydrocarbons regulator ANP from January-May, 15 were offshore and 15 onshore. Most of the offshore reports were in blocks where oil and natural gas previously had been found.
In the whole of 2006, companies registered 88 oil finds, according to ANP data.
Reports of oil or gas presence in existing fields was the case for finds in the Campos BC-60 and BC-10 blocks, the Santos Basin BS-500 block and Espírito Santo BES-100 block. Finds also were registered in Espadarte, Abalone, Peregrino and Peroa fields.
“This shows companies are drilling to improve their knowledge of existing discoveries,” Mauro Andrade, Deloitte Petroleum Services Group executive manager in Brazil, told BNamericas.
“The other finds are occurring as companies need to comply with exploration contracts signed in the past few years, but these finds will not necessarily mean an increase in reserves because the mere indication of a drop of oil is enough for companies to register with ANP.”
In addition to exploration around existing oilfields, many finds indicate the conclusion of 2-4-year exploration periods for contracts signed in the second through seventh exploration rounds.
“By the deadline, companies have to decide whether to give back blocks, explored or not,” said Andrade.
Based on minimum exploration requirements and investment programs, oil companies plan to invest US$6.8bn from 2006-10 in E&P, according to data from national oil industry organization ONIP.
The data does not include federal energy company Petrobras (NYSE: PBR), which plans to invest US$49bn in E&P in 2007-10.
The end of the first exploration stage of blocks awarded in 2003 is in November 2007 and for blocks awarded in 2005 in January 2008, according to ANP.
“Because the oil market is heated, equipment prices are high and there are only a few drilling rigs available, so companies that drilled were the most organized or committed,” said Andrade.
Petrobras has registered by far the most finds this year, mainly because it has the biggest portfolio and needs to maintain oil self-sufficiency.
“Petrobras now has to work hard to maintain oil self-sufficiency. What makes these finds even more significant is the fact Petrobras now uses market-efficiency criteria in its investments,” said Saul Suslick, geologist and oil economy professor at Campinas Unicamp university.
Petrobras has increasingly boosted return requirements on its exploration investments since Brazil’s oil market was opened to private companies in 1999 and the government sold 60percent of non-voting Petrobras stock.
“Having said this, it’s important to note that finds in deepwater blocks in Campos or pre-salt mattress will not be economically feasible unless they have at least 300M-400MB of reserves,” said Suslick.
Other operators such as US oil companies Devon (NYSE: DEV) and Anglo-Dutch oil company Shell (NYSE: RDS-B) are among companies that have registered oil finds in 2007.
But other companies have also registered finds such as Brazilian independents Queiroz Galvão, Starfish and Aurizonia as well as Portuguese state oil company Galp and compatriot private oil firm Partex.
Starfish and Petrobras in March discovered light crude in the onshore BT-REC-221 block in the northeastern Recôncavo basin. Starfish said the reserves are thought to contain 6.7Mb oil.
Galp, which had reported the promising Tupi discovery last year in the Santos Basin with partners Petrobras and BG Group (NYSE: BGR), reported a find in the onshore Potiguar basin block of POT-T-394 in May 2007.
Galp is ready to invest US$1bn in Brazil in coming years, the Portuguese embassy said in a statement.
All the finds, although not confirmed as commercial, indicate the potential of Brazil’s geology, said Suslick.
“Brazil has great potential,” he said. “Despite the regulatory problems we face, the exploration activity reflects that which started when ANP was created [in 1997]. The concern is what will happen from now on.”
Suslick believes the lack of ANP’s new geology studies as a result of federal budget cutbacks is a regulatory risk.
“The government doesn’t understand clearly that ANP needs... to carry out studies to prepare a portfolio of blocks in yearly rounds,” he said. “An example is the Gulf of Mexico basin, where studies have been prepared for the past 30 years.”
Brazil has yet to announce details of the ninth round.
Brazil’s proved reserves have increased at fast pace in recent years, reaching 12.2Bb of oil and 247Bm3 of natural gas at the end of 2006, according to ANP data. This is equivalent to a reserves-production ratio of some 19 years.
In 2001, proved reserves stood at some 8.3Bb of oil and 222Bm3 of natural gas.
“Brazil needs to keep offering good information on new areas and offer good portfolios at yearly licensing tenders to continue increasing its reserves because the oil industry cycle is very long,” said Suslick.
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