Petrobras Settles Confusion over Caramba, Jupiter Exploration Blocks
Petrobras, with regard to the article titled "Petrobras explored oil after deadline expiry," published in the June 22 edition of the O Estado de S. Paulo newspaper, clarifies that:
The exploration and production concession agreements signed between the National Petroleum Agency (NPA) and the concessionaires subdivide the exploratory phase into two or three periods. In the case of blocks BM-S-21 (Caramba) and BM-S-24 (Jupiter), the term for this phase is 8 years, subdivided into three periods: the first and second with three-year terms each, and the third, with a two-year term.
During each of these periods, the companies are required to comply with a minimum exploration schedule, which is defined in the concession agreement and normally includes the acquisition of seismic programs and/or drilling wells. To advance from one period to the next, all mandatory exploratory activities must have been carried out.
If oil or natural gas is discovered in the exploratory period, the concessionaires have the prerogative to propose an Evaluation Plan for such discovery to the NPA. This measure, as anticipated in the contract, extends the exploratory agreements automatically and, thus, the concessionaire has the right to retain the block or part of it. After the discovery Evaluation Plan has been completed, the concessionaires have the prerogative to declare the discovery commercial and then kick-off the field's production phase. The production phase lasts 27 years and can be extended specifically for offshore fields.
In the case of blocks BM-S-21 and BM-S-24, the first exploration phase periods started on 08/29/2001. The first period's exploratory programs were strictly performed with the execution of 850 Km2 and 2,041 Km2 of 3D seismics, respectively. The original commitment for the second period called for two shallow wells being drilled in each block which would not necessarily have to reach the pre-salt layer. Based on interpretation analyses of the seismic data that were acquired, as well as on their correlation with the results obtained for wells located in other blocks in the region, the concessionaires proposed the NPA make changes to the original commitment for the second period. The new commitment approved by the NPA involved drilling a deep well to reach the pre-salt section. It must be emphasized that the costs involved in drilling a deep well in this ultradeep water region, and then through the thick salt layer, is significantly higher than those involved in drilling the two shallow wells that had been foreseen originally.
Although all the efforts, external hurdles faced to secure an environmental permit to drill the wells and to hire the appropriate rigs blocked Petrobras to comply with the new commitment of reaching the pre-salt layer within the second exploratory period as originally forecasted. Therefore, the concessionaires applied for an extension for the second exploratory phase at the NPA what was legally authorized by the Agency, and no change was made to the deadline for the exploratory phase the concession agreement called for, i.e., August 2009.
The oil and natural gas discoveries made in blocks BM-S-21 (Caramba) and BM-S-24 (Jupiter), by means of the drilling of wells 1-SPS-51 (1-BRSA-526-SPS) and 1-RJS-652 (1-BRSA-559-RJS), respectively, were made, therefore, within the exploratory phase defined in the concession agreement, and the commitments taken-on for the second period were fulfilled. The discoveries were notified to the NPA, and this allowed the concessionaires to request an Evaluation Plan for the discovery without necessarily entering the third period of the exploratory phase.
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