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LatAmOil Issue 342
Week 48
News
Analysis
LATIN AMERICA Intelligence
OIL & GAS MONITOR Published by
NewsBase
COMMENTARY 2 NEWS THIS WEEK…
Brazil’s Congress finally approves legal
overhaul of oil industry 2 Overdue overhaul
Venezuela’s oil and China’s billions 3 Brazil’s Congress has approved a legal overhaul of
Belarus’ search for new suppliers 5 the oil sector with the creation of a production-
INVESTMENT 6
sharing contract system for future offshore subsalt
projects.
Brazil bid rounds to restart in H1 2011 6
It is hoped that the new system will enable Brazil
Petrobras mulls Hong Kong listing 7
to attract the major levels of investment that are
PERFORMANCE 7 required to develop its ultra-deepwater subsalt
properties. (Page 2)
Desire faces Falklands flop 7
Shell optimistic about restart of
The country is to auction key new areas in 2011 as
Venezuelan oilfield 8 it seeks investment from international oil
companies. (Pages 2,6)
POLICY 8
But some analysts remain concerned that
Guatemala to boost oil exploration with
2011 bid round 8 Petrobras could be overstretched by its subsalt
commitments. (Pages 2)
Peru LNG considers Asian market 9
PROJECTS & COMPANIES 9 Chavez charms China
Pampa looks to tight gas for plants 9 China is entrenching itself in Venezuela’s oil sector
Ecopetrol verifies heavy oil find 10
with the announcement of a package of deals worth
US$40 billion over the next five years.
Petrominerales announces new Llanos
Basin discovery 10 Venezuela currently sends around 362,000 bpd of
BPZ Resources kicks off production at oil to China, although that figure is expected to
Peruvian field 11 rise significantly. (Pages 3)
NEWS IN BRIEF 11
Venezuelan President Hugo Chavez also seems
TENDERS & CONTRACTS 16 willing to run the risk of complicating his relations
with Russia by courting Belarus. (Pages 3)
For analysis and commentary on these and other stories, plus the latest oil and gas developments, see inside…
Copyright © 2010 NewsBase Ltd.
www.newsbase.com Edited by Andrew Kemp
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
2. LatAmOil 07 December 2010, Week 48 page 2
COMMENTARY
Brazil’s Congress finally approves
legal overhaul of oil industry
Brazil’s Congress has approved a legal overhaul of the oil sector with the creation of a
production-sharing contract system for future offshore subsalt projects
By Nnamdi Anyadike
Brazil aims to attract the huge investment that is required to develop its ultra-deepwater subsalt properties
The country will auction new areas in 2011
Some analysts fear that Petrobras could be overstretched by its subsalt commitments
Brazil’s Congress has at last approved a projects and would become their other states have sought a more equitable
legal overhaul of the country’s oil sector operator. Petrobras already had 5 billion distribution.
with the creation of a production-sharing barrels of oil in the subsalt region set Jose Sergio Gabrielli, the current chief
contract (PSC) system for future offshore aside for it by the government, which executive of Petrobras (who is expected
subsalt projects. The news suggests that bought the rights to produce those to leave his post on December 31 when
the country may now be in a better reserves in a US$70 billion oil-for-shares Lula stands down) predicted that Brazil’s
position to attract the levels of swap. Congress could have to revisit the topic
investment required to develop its high- But while international oil companies of royalty payments for offshore oil
cost ultra-deepwater properties. will be relieved that Brazil has sought to production in 2011.
In theory at least, the move, which boost its state presence in the subsalt There is a possibility that Lula may
represents a victory for Brazilian sector without violating existing veto this part of the bill, in which case,
President-elect Dilma Rousseff, has contracts or riding roughshod over future said Gabrielli, the debate will begin anew
removed a significant political logjam investment plans (as was the case in next year under Rousseff’s incoming
and has cleared the way for Brazil to Venezuela and Ecuador) questions administration. The delay in approving
expand development of the offshore nonetheless remain about the process, its the oil legislation would be caused by the
oilfields. terms and whether there will be any fact that Congress would not have
Brazil can now resume auctions of political fallout that could jeopardise enough time to go through the process
deepwater reserves after halting them implementation of the overhaul. again this year.
nearly three years ago. Subsalt areas are
believed to hold more than 50 billion Major hurdle Overstretched
barrels of oil at depths of up to 7 km The one major hurdle that appears not A number of analysts question whether
under the ocean floor and Brazilian oil to have been satisfactorily cleared by this guaranteeing Petrobras operatorship plus
officials expect these new areas to be bill is that of royalties and the provision a minimum 30% stake in the new
tendered by the middle of 2011. (See: to allow non-producing Brazilian states offshore projects is the most cost-
Brazil bid rounds to restart in H1 2011, and cities to receive more royalties from effective way for Brazil to develop its
page 6) the sale of oil. This has been a bone of ultra-deepwater fields.
contention for years, with Brazil’s large A consensus view is developing that
PSC system oil-producing states wanting to keep a Petrobras will be overstretched, at the
The PSC system created by the new law majority of the royalty payments, while very least, once it becomes the sole lead
was first proposed by the outgoing operator in all future consortia that work
Brazilian President Luiz Inacio Lula da in the subsalt fields.
Silva last year as part of a broader Questions remain about Christopher Garman, an analyst at the
package of oil laws meant to ensure Eurasia Group, told the Financial Times
Brazil’s government got a bigger share of the process, its terms and that the government “is embarking on a
the revenues from the offshore whether there will be any route that will clearly lead to a slower
discoveries. pace of development. There’s a big
Under the new rules, state-run oil political fallout that could question as to whether they will be able
company Petrobras would have a jeopardise implementation to attract serious junior partners.”
minimum 30% stake in the new subsalt
of the overhaul
Copyright © 2010 NewsBase Ltd.
www.newsbase.com Edited by Andrew Kemp
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
3. LatAmOil 07 December 2010, Week 48 page 3
COMMENTARY
Petrobras, which in September the development of the fields, via the Mortgaging the future
successfully raised US$70 billion in PSC system rather than the current The extent to which some fear Petrobras
equity as part of an ambitious US$224 concession-based scheme. has mortgaged its future can be seen by
billion investment programme for 2010- It has also defended Petrobras’ plan to the sheer breadth of its activities. In
14, said it was preparing to train up to build up to five new refineries to meet addition to investing in and operating its
250,000 workers. But it is open to the country’s growing demand for fuels. subsalt fields and expanding its oil
question whether even these mammoth Gabrielli said that Brazil would be likely refining capacity, Petrobras is also
spending commitments will be enough, to consume 3.3 million bpd of oil committed to the production of biofuels,
and there is a suggestion that Petrobras derivatives by 2020, while crude oil and to cap it all it is committed to an
could run out of funds “within two or production is expected to be about 4 expensive “social-funding” programme.
three years” and be forced to return to million bpd. Petrobras’ current refining As well as allowing non-producing
capital markets for more equity. capacity of about 2 million bpd would Brazilian states and cities to receive more
Investors are also concerned that the clearly be unable to meet demand from royalties from the sale of oil the bill
interests of minority shareholders, who domestic refined production, he said. creates a fund to finance social
still provide the bulk of Petrobras’s However, analysts argue that work on programmes through future oil revenue.
capital, are becoming diluted. The at least one of the refineries, the US$12 Lula has often said he is determined that
government previously owned about billion Abreu e Lima joint venture with Brazil’s oil wealth be used to help lift the
40% of the company’s total capital. It Venezuela’s PDVSA, is advancing South American nation’s 192 million
now owns about 48%. despite the latter’s failure to pay for its residents out of poverty. But in a note to
Foreign shareholders, with some share of the project, thus leaving clients this week, Banco Santander
concern, point to the way in which Lula Petrobras to foot the whole bill. analysts Christian Audi and Vincente
has ordered Petrobras to build refineries Gabrielli conceded that Petrobras had Falanga Neto said Petrobras faced the
that analysts say make no commercial yet to receive any payments from its risk of being “overwhelmed” with
sense as a harbinger of what could Venezuelan counterpart. The refinery projects, given its extensive capital
happen in the future. will have installed capacity to process expenditure programme.
230,000 bpd of crude oil, with Petrobras Should Petrobras indeed become
Unique challenge and PDVSA initially expected to supply “overwhelmed” then Brazil’s citizens
However, the Brazilian government has half of the crude each. Petrobras will could be condemned to an even longer
dismissed such talk and said its subsalt own 60% of the project, with PDVSA wait than the three years they have
properties represent a unique challenge in holding 40%. already endured before the riches from
the global oil industry and there is a need the offshore subsalt region can finally be
to move as swiftly as possible towards realised.
Venezuela’s oil and China’s billions
China is entrenching itself in Venezuela’s oil sector with the announcement of a package
of deals worth US$40 billion over the next five years
By John Stibbs
China’s three biggest NOCs have committed to spending US$40 billion in Venezuela by 2016
Venezuela currently sends around 362,000 bpd of oil to China, with that figure expected to rise significantly
The partnership demonstrates a desire from both governments for greater co-operation
China’s strong bonds with Venezuela America. Asia has now elbowed past ideological adversaries. In China,
have been bolstered further with the Europe to become Latin America’s Venezuela has found a leftist partner
agreement of a US$40 billion investment second largest trading partner. Only the with a seemingly insatiable appetite for
plan. The package will see the Asian US now does more business than Asia its energy and the cash to help unlock its
country’s three largest state-owned oil with Latin American states. vast oil and gas riches.
companies sign up to six agreements Trade between the two countries has
with Venezuela. Left-leaning soared from US$85.5 million in 1999 to
The move is indicative of a shift in the Venezuela is particularly keen to find US$8.9 billion in 2008, reported
trading balance of power in Latin new markets away from its Western Bancoex, the state bank of Venezuela.
Copyright © 2010 NewsBase Ltd.
www.newsbase.com Edited by Andrew Kemp
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
4. LatAmOil 07 December 2010, Week 48 page 4
COMMENTARY
The OPEC member currently sends represented more than sound business the only South America economy still
approximately 362,000 barrels per day of sense. Li characterised the agreements as languishing in recession, despite being
oil to China – the world’s second largest “good for co-operation and the overall the largest oil producer in the Latin
consumer of crude after the US. strength of developing countries,” as America.
Commenting on the growing ties quoted by Xinhau on December 3. Poor financial management and an
between Beijing and Caracas, It is not the first US billion dollar emphasis on investing in social
Venezuelan Energy Minister Rafael agreement to be forged by the two programmes have left state-owned
Ramirez said his country was now countries in 2010. In April, China, with PDVSA with eye-watering debts and
China’s “third largest oil supplier.” its vast trade surplus, agreed to lend little room for movement. As a result, the
Ramirez said the recent agreements US$20 billion to Venezuela. It is the country is looking for allies to tap the
signed with Chinese national oil largest loan the China Development massive oil reserves of the Orinoco
companies (NOCs) were worth US$40 Bank has ever made to a country. basin.
billion over the next five years. In exchange for the huge amount of Meanwhile, China, with its bulging
cash, Venezuelan President Hugo Chavez pockets, has been casting an eye around
Joint approach promised to meet the Asian giant’s the world looking for savvy investment
Speaking at the Gas Exporting Countries energy needs. “We agreed on a huge, opportunities. In 2009 alone it spent
Forum ministers’ meeting in Qatar on long-term financing plan. This is a larger US$32 billion on the acquisition of
December 2, he said Sinopec, China scope, a super-heavy fund. China needs global assets to meet its soaring mineral
National Offshore Oil Corp. (CNOOC) energy security and we’re here to provide and energy needs. Elsewhere in Latin
and China National Petroleum Corp. them with all the oil they need,” he said America, Beijing has issued a US$10
(CNPC) would all operate in the cash- at the time. billion loan to Brazil’s state-run
strapped South American country in joint The Chinese have also provided a Petrobras in return for a long-term oil
ventures with Venezuela’s state-run US$12 billion bilateral investment fund, supply contract.
PDVSA. US$8 billion of which has paid for And in Venezuela, China is providing
Sinopec is to work in the Junin 1 and infrastructure projects, reported Business more than just money. Referring to a
Junin 8 blocks. CNOOC’s gas production Week. This debt is also being repaid in China-built satellite that Venezuela sent
expertise will be used in the Mariscal oil, Venezuela’s primary source of into space in 2008, Chavez said: “The
Sucre fields, whilst CNPC will continue capital. relations between China and Venezuela
its operations on the Junin 4 block. extend from below the surface of the
Collectively, the three Junin Orinoco Differing fortunes earth to outer space. We’re producing oil
blocks have a potential production yield While China is the world’s fastest together and our satellite is out there in
of 600,000 bpd of oil. growing major economy, Venezuela space. This is a mutating world in
The investment will help Venezuela to remains in the economic doldrums. It is transition.”
reach its goal of producing 7 The Chinese economic
million bpd of crude by 2021, juggernaut is not powered by
up from its current output of rhetoric alone, however.
around 3 million bpd. Ramirez Reflecting on the recent US$40
said investment of US$120 billion investment, vice premier
billion was required in eastern Li made this unashamedly
Venezuela’s Orinoco Belt realistic assessment: “China will
before 2017 in order to achieve conduct relations with Venezuela
those production goals. [from] a strategic point of view
and promote pragmatic co-
Greater co-operation operation in all areas.”
The partnership between the His drab appraisal lacks
heavy-hitting NOCs Chavez’s dramatic delivery and
demonstrates a desire from both allows little room for romantic
governments for greater co- idealism. There is little doubt,
operation. however, that the two countries
Chinese Vice Premier Li look set to embark on a long and
Keqiang said the investment fruitful relationship.
Copyright © 2010 NewsBase Ltd.
www.newsbase.com Edited by Andrew Kemp
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
5. LatAmOil 07 December 2010, Week 48 page 5
COMMENTARY
Belarus’ search for new suppliers
As relations with Russia grow ever more strained, Venezuela is becoming Belarus’ main
alternative source of oil
By Dmitry Shlapentokh
Moscow has been increasingly unwilling to subsidise Minsk’s fuel and energy bills
As a result, the two sides have sparred over oil and gas transits and prices
Chavez seems willing to run the risk of complicating relations with Russia by courting Belarus
Belarus may have been the only republic Deteriorating relationship country that may become Belarus’ main
of the former USSR that truly wanted to Consequently, by 2006, the Kremlin had alternative to Russia.
preserve the union. It was quite drastically increased the price of Russian Hugo Chavez, the South American
Russified, and this was apparently one of gas. After this, the relationship between country’s flamboyant president, said
the major reasons why Belarusian Minsk and Moscow steadily deteriorated. during a recent visit to Belarus that
strongman Alexander Lukashenko was, This was certainly evident in the summer Lukashenko should not be worried, since
even during the Boris Yeltsin era, prone of 2010, when Moscow and Minsk once Venezuela could provide Belarus with oil
to voicing his desire for union with again disagreed on gas prices. After for 100 years.
Russia. Russia decided to halt gas deliveries to Inspired by these assurances,
Still, pragmatic interests lay Belarus, Minsk retaliated by blocking Lukashenko said recently that Belarus
underneath these expressions of Russian gas shipments to Europe. would drastically reduce its purchases of
Slavophilic emotion and pro-Soviet Later, Moscow intensified the Russian oil. Thus, Moscow’s attempt to
nostalgia. During the 1990s, Lukashenko propaganda war with Minsk. Russia’s impose its will upon Minsk seems to
watched Yeltsin grow increasingly NTV television channel released a nasty have failed.
unpopular and believed that he could movie on Lukashenko, presenting him as While the reasons for Lukashenko’s
well succeed him if a new election were a mafia boss engaged in corruption and interest in Venezuelan oil are clear, one
held in a new union state. contract killing. Consequently, the might question the rationale for
Even more important, however, were Belarusian side retaliated by publishing a Venezuela’s action. How could Chavez
economic considerations. Specifically, report, narrated by members of the benefit from forging ties with
Russia was Belarus’ major source of Russian opposition, that presented the Lukashenko?
natural gas and crude oil, and the latter Russia run by Putin and his successor as
country’s economy was in constant need president, Dmitry Medvedev, as a Changes
of these commodities. As such, disintegrating country, declining on all The Venezuelan leader surely
Moscow’s willingness to provide fuel fronts. understands that close ties with Belarus
and energy at relatively low prices would irritate Russia. This should be a
appears to have been the major reason Alternative suppliers concern for Chavez, since his regime has
why Lukashenko accepted Yeltsin’s It became clear to Lukashenko that maintained strong ties with the Kremlin
proposal to work toward the creation of a continued reliance on Russia as a source for a long time.
new state to unite Russia and Belarus. of gas and oil would be quite risky. As a The relationship between Moscow and
At the beginning of his tenure in the result, his government began looking for Caracas was especially firm during the
late 1990s, Yeltsin’s successor, Vladimir alternative suppliers all over the world. Putin era, before Medvedev’s ascension
Putin, seemed to be ready to strengthen Earlier this year, Minsk began courting to the presidency in 2008. Before that
this alliance and to continue providing Caracas, and its efforts appear to have time, Venezuela had no trouble acquiring
Lukashenko with cheap gas and oil. Yet borne fruit. thousands of Kalashnikov submachine
as time passed, the relationship between Indeed, Venezuela has emerged as the guns from Russia, despite US opposition
Moscow and Minsk became increasingly to such deals.
tense. By the end of Putin’s tenure, the Russia and Venezuela also engaged in
Kremlin had come to view Lukashenko The Venezuelan leader joint naval exercises while Putin served
as a problem, especially in light of its as president. These exercises were meant
own growing unwillingness to subsidise
surely understands that to prove certain points.
anyone. close ties with Belarus
would irritate Russia
Copyright © 2010 NewsBase Ltd.
www.newsbase.com Edited by Andrew Kemp
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
6. LatAmOil 07 December 2010, Week 48 page 6
COMMENTARY
First, they were designed to show the US longer regard each other as enemies, and moment, he could well be sacrificed in
that Russia was still a global power that the deep freeze in the relationship that the same way as Iranian President
could project its naval power far outside marked the end of the Putin era has been Mahmoud Ahmadinejad has been, and
its own borders. Secondly, they served as replaced by a thaw. here Lukashenko has emerged as a useful
a message to Chavez that Moscow still The reasons for this change are many. back-up.
regarded Washington as a major enemy One of them is the fact that Russia and Russia and Europe have a generally
and was ready to support Caracas in its the US are both concerned by the condescending view of Belarus.
confrontation with the latter. spreading of Islamic extremism in However, the former Soviet republic has
On the surface, relations between the Afghanistan and Central Asia. a viable industrial and scientific base that
Kremlin and the Venezuelan regime are The shift in Russian attitudes is is, in some respects, more developed than
still close. During a recent trip, Chavez evidenced by Moscow’s decision to take those of Russia. Consequently, Minsk is
visited not only Minsk but also Moscow, a different – and less friendly – approach in a good position to provide Venezuela
where he had an amicable conversation towards Iran, which was long regarded with much-needed industrial goods,
with Medvedev and signed several by many observers as one of Russia’s know-how and even weapons in
contracts. most important allies. For example, while exchange for crude oil supplies.
finishing the Bushehr nuclear plant in All of these factors indicate that a
US-Russian “reset” Iran, after many years of delay, Moscow Belarusian-Venezuelan marriage might
Still, the Venezuelan leader cancelled contracts for the delivery of S- be a viable enterprise, even though this
undoubtedly understands the changes 300 missiles and joined in the toughest would displease both Russia and the
that have taken place both in Washington sanctions imposed by Washington. US.
and Moscow. The US and Russia no Chavez understands that at any given
INVESTMENT
Brazil bid rounds to
restart in H1 2011
Brazil could hold a new auction round of regions but instead other promising Tupi discovery, which alerted the world
exploratory blocks in the first half of next exploratory frontiers both on and to the potential of Brazil’s subsalt region.
year, the head of the country’s energy offshore. He said the commission could The government has since redesigned
regulatory agency said. also decide to authorise the start of the country’s oil legislation, moving to a
Brazil’s National Energy Policy auctions of subsalt blocks “but the production-sharing agreement (PSA)
Commission could meet early in the new practical processes [an actual auction regime and reserving the lion’s share of
year to approve the restart of auctions, round] will only occur in the second half the subsalt for Petrobras, which will be
suspended following a tenth round with of the year, because the first half will be the sole operator in all future subsalt
the discovery of the giant Tupi subsalt consumed with the 11th round.” blocks to be auctioned off as well as the
field in 2008, said chief regulator Lima said that before a subsalt auction holder of a minimum 30% stake in all
Haroldo Lima. could be held new oil legislation would future consortia.
The commission could also approve have to be signed by Brazilian President Critics claim the new legislation will
the start of auctions for subsalt fields, Luiz Inacio Lula da Silva. diminish the appetite of international oil
including the giant Libra find, though The regulator said that any subsalt companies (IOCs) in future subsalt
these are unlikely to be held before the auction would likely include the auctions. But the government said it had
second half of the year. “An 11th round mammoth Libra field, which consultants already fielded interest from national oil
is already ready to go. All the hired by the regulator estimate could companies (NOCs) from China and
mechanisms are practically concluded. hold up to 15 billion barrels of oil alone. elsewhere and expected many
We just need the authorisation of the Brazil started holding auction rounds international oil companies to participate,
commission,” said Lima in an interview for exploratory blocks under a given that the subsalt’s potential size is
with the Estado de S. Paulo newspaper. concessionary regime in the 1990s. But estimated at between 50-150 billion
Previously Lima had said that an the government suspended the process barrels of oil.
eleventh round would not include subsalt following the five to eight billion barrel
Copyright © 2010 NewsBase Ltd.
www.newsbase.com Edited by Andrew Kemp
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
7. LatAmOil 07 December 2010, Week 48 page 7
INVESTMENT
Petrobras mulls Hong Kong listing
Petrobras is considering listing on the taken place. Petrobras to develop the offshore subsalt
Hong Kong stock exchange, according to Fellow Brazilian mining giant and fields.
the head of the São Paulo stock Petrobras partner, Vale, will start trading A Petrobras listing in Hong Kong
exchange, location of the company’s in Hong Kong this week through a Hong could open up a new source of capital for
primary listing. Kong Depository Receipt issue. The a company that is seeking funds for its
“We’ve had conversations with company said it would not raise any new US$224 billion five-year investment
Petrobras along those lines. Asia is where capital via the exercise. plan. The plan only includes budgets to
there’s the largest number of individual Both Vale and Petrobras have strong develop existing blocks and not the
investors,” the CEO of the São Paulo and deepening links with China. Vale is estimated 70% of the subsalt region still
bourse, Edemir Pinto, told reporters at a the biggest iron ore exporter to the Asian to be auctioned off by the Brazilian
conference last week. As well as being giant, which is its biggest customer. government under new laws by which
traded on the São Paulo exchange, Meanwhile, Petrobras signed a massive Petrobras will the sole operator of all
Petrobras American Depositary Receipts oil-for-loans deal with China last year, future blocks.
(ADRs) are traded in New York. with Chinese state banks lending it In September Petrobras raised almost
In an email commenting on Pinto’s US$10 billion in return for guaranteed oil US$70 billion in a share issue in Brazil,
declaration, Petrobras said: “There is no imports over a 20-year period. though more than half came from the
movement within the company in this Since that deal was signed there have Brazilian government and state-
sense toward a share listing in Hong been consistent rumours that further controlled institutions as opposed to
Kong.” The company failed to confirm or deals are being discussed and that private investors.
deny Pinto’s claim that conversations had Chinese oil companies could partner with
PERFORMANCE
Desire faces Falklands flop
Less than a week after announcing an oil mobile fluid is water.” prospectivity of the East Plank fairway
discovery at its Rachel North well in It said it still believed a deeper target for future oil discoveries,” Phipps said in
waters around the Falklands, UK was oil-bearing “but the interval is thin the statement.
explorer Desire Petroleum turned full and reservoir quality is poor.” Desire said some of the sands were
circle December 6 and announced that “Despite this setback, the presence of similar to those in Rockhopper
further analysis showed the well was dry. hydrocarbons and good reservoir Exploration’s Sea Lion discovery, the
“Having seen the highly encouraging development have been identified in a only oil find to date in the Falklands.
results from the first two logs … on this number of the Rachel fan sands and we Desire said it would re-map them all to
well, plus accompanying oil shows, it is therefore continue to believe in the identify where better reservoir quality
extremely disappointing that the could be found.
subsequent wireline logs and fluids After Rachel North is plugged and
sampling have dashed all the earlier
“It is extremely completed, the drill rig will move to
promise of this being Desire’s first oil disappointing that the Desire’s Dawn/Jacinta prospect, after
discovery in the North Falkland Basin,” which it expects to drill another well at
the company’s chairman, Stephen
subsequent wireline logs another location yet to be decided.
Phipps, said in a statement on December and fluids sampling have Desire has a kitty of around GBP75
6, four days after announcing the million (US$118.3 million), which it said
discovery. The news caused Desire’s
dashed all the earlier would be enough to drill the
shares in London to drop by 50%. promise of this being Dawn/Jacinta prospect and another well,
Desire said the sampling of the main whilst also covering the cost of 3-D
sand in the well “has shown that the
Desire’s first oil discovery seismic studies.
hydrocarbons are residual and that the in the North Falkland
Basin”
Copyright © 2010 NewsBase Ltd.
www.newsbase.com Edited by Andrew Kemp
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
8. LatAmOil 07 December 2010, Week 48 page 8
PERFORMANCE
Shell optimistic about restart
of Venezuelan oilfield
Shell was optimistic that its Petroregional be starting up production … between On November 26, two of Venezuela’ s
del Lago oilfield in Venezuela would Monday [December 6] and Tuesday upgraders were out of operation and two
restart soon, possibly even in the week [December 7].” others were performing at under capacity
commencing December 5. The joint Prado was also positive about how the as a result of the severely inclement
venture with state-run PDVSA should be work had been managed despite the weather, Reuters reported. A PDVSA
producing 31,000 barrels per day of adverse circumstances, saying: “We’ve source said Venezuela’s four upgraders
crude but it has been out of operation been able to meet the plan despite the were producing 300,000 bpd, less than
since around October 20. rain.” Heavy rains have beset parts of half their capacity of 620,000 bpd.
The joint venture is 60%-owned by Venezuela and neighbouring Colombia The 180,000 bpd Petropiar upgrader
PDVSA and came into being following for several weeks, leading to severe was due to begin operating again on
the country’s nationalisation programme. flooding. November 25 but its relaunch was held
The field, which is located in Lake While the Petroregional del Lago back. “It was supposed to restart today,
Maracaibo’s West Urdaneta area in the maintenance work appears to have but it has not been possible. We are
state of Zulia, has been out of production proceeded without a hitch, other oil waiting for the storm to end to restart the
for 45 days of scheduled maintenance. installations have not escaped the loading of tankers and to re-programme
In contrast to PDVSA’s caginess weather without problems. The unusually it,” a source told Reuters.
surrounding the exact circumstances of heavy rain has claimed at least 31 lives Venezuelan President Hugo Chavez
the suspension of activity – it chose not and made tens of thousands homeless. has taken control of the country’s
to disclose either when the work had Venezuela’s largest refinery, the giant response to the emergency, even putting
begun or when it would end – Shell Centro de Refinación Paragianá, as well up people in the presidential palace. He
Venezuela’s president, Luis Prado, told the production of heavy crude from the has placed responsibility for the flooding
journalists on December 1: “We should Orinoco Belt, has also been affected. on the effects of capitalism.
POLICY
Guatemala to boost oil exploration
with 2011 bid round
Guatemala’s Energy Ministry expects to Caballo wells, the latter of which is The blocks are located offshore the
receive bids from international oil believed to contain gas. PTN 3 equates to country’s Pacific coast and are believed
companies to explore six oilfields in the the San Francisco well, while PTN 4 to contain natural gas.
country in the second quarter of 2011. contains four sections to be explored,” it The details of the tender rules have
The ministry said IOCs were expected to said. now been published in the official
submit bids on April 8, 2011. It will be Guatemala currently produces between gazette but there are no details about
the country’s first bid round since 2002. 35,000-40,000 barrels per day of heavy what kind of reserves might be found in
In a statement the ministry said that the oil, up from 16,000 bpd in January. The the areas that are up for auction.
areas to be tendered were in the regions lion’s share of production comes from According to Guatemalan President
of Petén, Huehuetenango, Quiché and wells in the northernmost Peten Alvaro Colom, the aim is to triple the
Alta Verapaz. department. country’s hydrocarbon output, with plans
“The first contract will include three Last year, Guatemala delayed the to ramp up oil production to 60,000 bpd
areas located in the central zone of Petén, auction of 16 blocks, which the by 2011.
the northernmost region of Guatemala. government estimated would draw as
PTN 1 comprises the Yalcanix and Paso much as US$235 million in investment.
Copyright © 2010 NewsBase Ltd.
www.newsbase.com Edited by Andrew Kemp
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
9. LatAmOil 07 December 2010, Week 48 page 9
POLICY
Peru LNG considers Asian market
Peru LNG is set to ship 57-58 cargoes of production will go to a receiving terminal LNG at Repsol, which holds a 20% stake
liquefied natural gas (LNG) in 2011, in Manzanillo, Mexico, when it comes in the Peru LNG consortium.
some of which could be sent to Asia. onstream in the last quarter of 2011. Reuters reported that Peru LNG was
The US$3.8 billion Peru LNG “We are not ruling out the possibility currently in talks with Asian buyers.
terminal, South America’s first LNG of sending Peru LNG to Asia, but only Meanwhile, Bloomberg quoted Bruce as
plant, began exporting in June and is the limited volume we would have after saying that more production units might
expected to have exported 24 cargoes by our commitments to Manzanillo,” said come online in four to five years,
the end of this year, Barbara Bruce, Peru Benjamin Palomo, managing director of depending on gas discoveries in the area.
LNG’s general manager, told delegates at “The expectation is more gas, and most
a recent event in Barcelona. probably a second and if possible a third
Twenty cargoes have been shipped so “We are not ruling out the train for the excess gas that we’re sure
far, she said. Of those, the first went to possibility of sending Peru we’re going to find,” she said.
Canaport LNG terminal in New The plant has capacity to produce 4.45
Brunswick, eastern Canada. Others were LNG to Asia, but only the million tonnes per year of LNG, said
sent to northwestern Europe. limited volume we would Graham Lawton, general manager of
Regarding next year’s production, Compania Operadora de LNG del Peru,
officials have also said Asia is a possible have after our the plant’s operating company. It is
destination, although the bulk of commitments to Mexico” currently running at full capacity.
PROJECTS & COMPANIES
Pampa looks to tight gas for plants
Argentina’s Pampa Energia is taking Campamento and Estacion Fernandez Pampa said that the total of 1.5 mcmd
steps to ensure natural gas for its thermal Oro fields. would go to Loma de la Lata to meet
power plants (TPPs) by teaming up with Pampa will get 15% of the output as more than half of its demand for 2.6
a leading producer on an unconventional part of the three-year project investment, mcmd.
gas project. and it will buy the rest of fields’ output to It wants to avoid getting cut off from
Last week, Pampa Energia said in a supply its Loma de la Lata power plant in supplies in winter, when gas shortages
statement it would invest US$20 million the province of Neuquen. have led the government to restrict
in a US$130 million project to develop It wants to make sure it gets sufficient deliveries to factories and power plants
reserves of tight gas over three years in supplies of gas for its power plants by to ensure steady supplies for homes. In
Neuquen, a southwestern basin gaining striking purchase deals directly with response, power plants have had to burn
attention for its potential for producers. This is one of its first direct costlier diesel and fuel oil, hitting their
unconventional gas. investments as part of a deal for securing profits.
Companies like France’s Total and gas supplies. In August 2009, it agreed to The shortages are expected to continue
Repsol-controlled YPF are betting on purchase 800,000 cmd of gas also from until there is a turnaround in the gas
tight and shale gas to offset declines in Apache. decline. National gas production – 95%
traditional gas production because of is traditional gas – has dropped more
maturing fields. than 7% in 2010 to 132 mcmd from a
Through its oil unit Pampa Petroleo, Pampa Energia said it record 143.1 mcmd 2009.
Pampa will work with Houston-based With the economy growing strongly,
Apache Corp. on the project, expecting
would invest US$20 demand is rising for an energy source
to produce 700,000 cubic metres per day million in a US$130 that supplies more than 50% of national
of tight gas at the Anticlinal energy needs.
million project to develop
reserves of tight gas over
three years in Neuquen
Copyright © 2010 NewsBase Ltd.
www.newsbase.com Edited by Andrew Kemp
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
10. LatAmOil 07 December 2010, Week 48 page 10
PROJECTS & COMPANIES
Ecopetrol verifies heavy oil find
Ecopetrol has claimed to have proved the owns a 55% stake, while Canadian- Gutierrez said.
presence of heavy oil in the Acacias-1 owned Talisman Oil and Gas Ltd holds He added that the company was
exploratory well, in the company’s CPO- the remaining 45% interest. focused on increasing its reserves and
9 block in central Colombia. “The results of initial production tests, boosting production by more than 12%
In a statement on December 1, made available just recently, show crude annually “until we reach one million
Ecopetrol said that the discovery was oil production of 9.3 degrees API, with barrels equivalent [per day] by 2015.”
made near the town of Acacias, in the average flow of 1,280 barrels per day,” The discovery was the fifth in Colombia
central province of Meta, adding that it said Ecopetrol in the statement. It said in 2010 for Ecopetrol, which is the
was the “sixth find with Ecopetrol drilling began on August 31 and reached Andean nation’s largest firm and one of
participation since the beginning of a depth of 11,780 feet (3,590 metres). the world’s 40 largest oil companies.
[2010], and the third in the Eastern “This new hydrocarbons discovery in On the same day, Ecopetrol reported a
Llanos region.” the Eastern Llanos substantiates the local public bond issuance and placement
Ecopetrol, which is 89.9%-owned by important potential of this region, which amounting to US$800 billion. The
the Colombian government, said the produces 40% of the country’s oil, company noted that the objective of the
drilling fell under an exploration and joining other recent discoveries by placing would be to finance its 2010
production contract signed with the Ecopetrol and other companies and Investment Plan. Ecopetrol accounts for
National Hydrocarbons Agency (ANH). encompassed in our heavy crude more than 60% of Colombia’s oil
Ecopetrol operates the CPO-9 block and strategy,” Ecopetrol CEO Javier output.
Petrominerales announces
new Llanos Basin discovery
Petrominerales announced that one of its the well has a natural flow of 5,600 bpd. In December, the company expects to
Llanos Basin discovery wells in The exploration and production company post production results from drilling
Colombia has tested at a flow rate of is setting up additional facility capacities work at the Corcel-E2 well. On
10,000 barrels per day of oil. to meet the planned 12,000 bpd. November 27, it measured depth to
Following a seven-hour production The Latin America-orientated operator 13,180 feet (4,000 metres) and the
test, the company believes the Caruto-1 has ambitious plans for further resulting well logs are being studied.
well will produce 12,000 bpd of light oil. exploration. Inspired by Caruto-1, it is Petrominerales also expects to have the
The company recently reported that its looking into the opportunities offered by results of its Yatay-1 exploration well in
average oil production in November was other drilling locations. “Based upon the the Guatiquia block before the end of the
30,938 bpd. log and test results, we are currently year.
The company, in which Petrobank evaluating the possibility for follow-up Looking forward to 2011, the company
Energy and Resources has a 65% stake, drilling locations on the discovery,” said said it would “incorporate the Caruto-1
announced the result of the discovery on the company. “The Caruto-1 well results well results into our geological model
November 29, a few weeks after drilling demonstrate the high-impact exploration and adjust our drilling order as required.”
work was completed. opportunities present on our Llanos Petrominerales also plans to release
The well is in the north-east of the Basin blocks.” news from the promising Central Llanos
Corcel block. The company said it had a In total, Petrominerales has 17 blocks, where the first of a four interval-
total measured depth of 13,024 feet exploration blocks across 2.1 million testing programme has begun in the
(3,970 metres), while well logs showed a acres (8.500 square km) of the Llanos Mirador formation. The programme
total of 47 feet (14.32 metres) of and Putamayo Basins. Additionally, it should be completed and results are
potential net pay of 32 degree API oil at holds 9.4 million acres (38,000 square expected to be available this year. Log
a 0% water cut in the Lower Sand km) of Peru’s Ucayali and Titicaca results from Mantis-1 are similarly
formation. Basins, where it has five exploration anticipated before the end of the year.
Without the aid of an electric pump, blocks.
Copyright © 2010 NewsBase Ltd.
www.newsbase.com Edited by Andrew Kemp
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
11. LatAmOil 07 December 2010, Week 48 page 11
PROJECTS & COMPANIES
BPZ Resources kicks off
production at Peruvian field
US-based BPZ Resources announced it planning and execution our team can redevelopment of the Albacora oilfield,
had launched commercial production at meet key milestones,” said Richard and the exploration of Blocks XIX, XXII
the Corvina oilfield in offshore Block Z- Spies, COO of BPZ. and XXIII, in parallel with the execution
1 in north-west Peru. The company’s CEO, Manolo Zuniga, of an integrated gas-to-power strategy.
BPZ has contracts for approximately added: “The Corvina oilfield is our first The latter programme includes
2.2 million acres (8,903 square km) in field in commercial production. Our generation and sale of electricity in Peru
four properties in northwestern Peru. It investors have been watching for us to and the development of a regional gas
also owns a minority interest in a field in execute on this milestone, and I am marketing strategy.
Ecuador. pleased with our team’s commitment to Zuniga recently said the company
The company has started operating the meeting the announced schedule. We are expected capital expenditure in 2011 to
gas compressor at the CX-11 Corvina currently working on the future reach US$80 million, which would
platform to re-inject the associated gas development of Corvina, and committed largely be invested in seismic work and
and thus avoid gas flaring. It is now in to installing the required gas re-injection rehabilitation activity at Albarcora.
the process of re-opening the Corvina oil equipment at Albacora so we may bring Bloomberg reported last month that the
wells that were shut-in because of gas- our second oilfield into commercial company had hired Credit Suisse
flaring restrictions. production by year-end 2011.” Securities as a financial advisor to help
“This is a great achievement for our BPZ is currently executing the pursue joint ventures and options for
operations team and the company in development in Block Z-1 of the Corvina financing operations in Peru.
general, as it proves that with proper oil discovery, as well as the
NEWS IN BRIEF
with the China National Offshore Oil the current 166,000 barrels.
OIL Corporation bought BP’s stake in Pan According to a communication disclosed
American Energy. But Bulgheroni said on Monday by ANP, the subsalt region
Argentina’s he was not interested in taking a stake in showed a decrease of 13.7% in
YPF, Argentina’s biggest energy production compared to the previous
Bulgheroni admits company. month, reaching 43,978 barrels of oil per
eyeing Esso assets LA NACION, December 3, 2010 day and 1.607 million cubic metres of
Argentina’s Bulgheroni brothers are not natural gas per day.
content with having acquired half of ANP indicates oil Petrobras could not inform Reuters on
Argentina’s second biggest oil producer, production at the the reason for the downfall on production
Pan American Energy. Alejandro same level as in in the subsalt fields. ANP considers only
Bulgheroni, Pan American’s president, the production volume in the fields
admitted he could be interested in Esso
2009 operated by the company and not the
assets which ExxonMobil is believed to Oil production in Brazil was at 1.998 participation on blocks.
be seeking to sell in Argentina. “We have million barrels per day in October, a Rio de Janeiro continues to be the largest
never been interested in service stations, stable figure compared to September this oil-producing state, with 1.555 million
but the majority of Esso’s oil is provided year and an increase of only 0.36% barrels per day, or 77.9% of the total,
by us. There are synergies between us. I compared to October 2009, according to followed by Espirito Santo and Bahia,
can’t say anything but there are synergies data by the National Petroleum Agency with 233,200 barrels of oil per day and
between our oil and that which Esso (ANP). 45,900 barrels of oil per day,
refines,” Bulgheroni said. The volume of oil produced in October respectively. Amazonas, Rio Grande do
He also said discussions were ongoing places the country at the same level as a Norte, Sergipe, Sao Paulo, Alagoas and
about whether Pan American would now year ago, when Petrobras produced 1.990 Ceara are also producing states, totalling
merge with Bridas, the Bulgheroni’s million barrels of oil per day and private a production of 163,300 barrels per
private company which in partnership companies had a production smaller than day.
Copyright © 2010 NewsBase Ltd.
www.newsbase.com Edited by Andrew Kemp
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
12. LatAmOil 07 December 2010, Week 48 page 12
NEWS IN BRIEF
Petrobras is the absolute production by 2019 to 100 million cubic meters a
leader in the country, with 1.824 million day, boosted by rising consumption as it Petrobras finds more
barrels of oil per day in October. In replaces oil fuels because it is cheaper, oil in the Sergipe-
second place, comes Shell, with 93,200 the ministry said. Brazil will add 1,707
Alagoas basin
barrels per day and Chevron Frade, with kilometers (1,060 miles) of gas pipelines
50,800 barrels per day. Devon registered during this period, it said. Petrobras informed the National
a production of 26,600 barrels per day in Petroleum output is expected to rise Petroleum Agency (ANP) about an oil
October. 161% by 2019, the ministry said. find in 1BRSA875SES well, block Seal-
According to ANP, the Roncador field BLOOMBERG, November 29, 495, in the Sergipe-Alagoas basin.
was the largest oil producer and the 2010 According to ANP, the finding took
Manati field the largest natural gas place with a water layer of 1,393 metres.
producer, both controlled by Petrobras. Santos at 130,000 Petrobras acquired the block on its own,
O GLOBO, December 1, 2010 bpd by next year during the sixth round of bids on oil
areas by the Brazilian government, in
Brazil to need Petrobras, expects to double crude oil 2004, having paid 33% on the minimum
production in the Santos Basin by the end
US$550bn in energy of 2011, a company official told the local
price of 30 million Brazilian reais
(US$17.92 million) set up by ANP,
investment by 2019 Estado news agency Wednesday. totalling around 40 million Brazilian
Brazil will need 952 billion reais In an interview with Estado, Petrobras reais (US$23.9 million).
(US$550 billion) of energy investment general manager for the Santos Basin’s This year, Petrobras had already
through 2019 to cover rising demand exploration and production, Jose Luiz announced other findings in the same
primarily for ethanol, biofuels and Marcusso, said that crude oil output in basin, considered to be a new frontier
natural gas, the Energy Ministry said. the Santos Basin was expected to reach and where oil has a better quality than
Brazil will invest about 672 billion reais 130,000 barrels a day by the end of 2011, the Brazilian average, around 24.6
to explore, produce and supply oil and up from about 61,000 barrels a day degrees API (average density), according
natural gas, another 214 billion reais to currently. Natural gas output could to ANP.
generate and transmit electricity and 66 potentially reach 17 million cubic meters In October, the company informed its
billion reais to supply biofuels, the per day, but that would depend on first finding in the ultra-deep waters of
ministry said in an expansion plan demand for the clean-burning fuel, the region, at the 1-RSA-851-SES well,
approved on Nov. 26 and published Marcusso said. known as Barra.
today on its website. Quick development of the Santos Basin, ALAGOAS EM TEMPO REAL,
New international environmental accords home to Brazil’s so-called subsalt oil December 7, 2010
and the world economic rebound may fields, is part of Petrobras’s ambitious
help the South American country to US$224 billion investment plan over the Guatemala lists
almost triple exports of ethanol to 9.9 next five years. Petrobras wants to Brazil among interest
billion liters in 2019, the report said. double oil production to nearly 3.9
million barrels a day, making Brazil one parties in oil bid
Brazil will have to build 103 new ethanol
mills during this period, of which 30 are of the world’s top five oil producers. Guatemala invited international
under construction. Sugar cane output The ultra-deepwater fields are buried companies interested on the exploration
may rise 66% to 1.14 million tons by below more than 4 miles of sea, sand, and production of four oil areas in four
2019. rocks and a shifting layer of salt. A pilot regions north of the capital, despite not
Demand for ethanol will jump 90% to 64 production project at the Tupi field, providing any information on the volume
billion liters in 2019 with the expansion estimated to hold recoverable reserves of of oil reserves in the areas. The President
of so-called flex-fuel vehicles, which can between 5 billion and 8 billion barrels of of Guatemala, Alvaro Colom, published
solely run on ethanol or a mix of the oil equivalent, or BOE, started in late in Guatemala’s official newspaper a
biofuel with gasoline, the Energy October. governmental deal in which he set up the
Ministry said. Marcusso said that the Tupi pilot, the rules for the receival of offers and the oil
Petroleum demand in the South first to test output at the deepwater fields, extraction contract in the areas present in
American country will rise 3.8% while should reach its production capacity of the auction. Offers will be received until
gasoline consumption declines 2.1%, the 100,000 barrels a day in 2012. April 8, 2011. Three of the blocks are
ministry said. Demand for natural gas DOW JONES, December 01, 2010 located in the province of Peten, and the
and electricity will rise 8.5% and 5.3%, other block between the departments of
respectively, it said. Alta Verapaz and Quiche, all of them
Brazil’s gas production may climb 187% north of the City of Guatemala.
Copyright © 2010 NewsBase Ltd.
www.newsbase.com Edited by Andrew Kemp
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents