Reuters: Shell to resume drilling in Brazil next year

Reuters: Shell to resume drilling in Brazil next year

By Andrei Khalip

Wed 18 August, 2004

RIO DE JANEIRO, Brazil (Reuters) – Royal Dutch/Shell will resume drilling works in Brazil early next year at its BC-10 Campos basin block where it has already found oil, a top Shell official says.

John Haney, vice president for exploration and production for the Anglo-Dutch energy company in Brazil, said on Tuesday it had found “intermediate” grade API 18-25 oil there and was evaluating the discoveries. Its last well was drilled a year ago.

Apart from that, it has found oil at its Santos basin BS-4 block and at Campos blocks BC-2 and BMC-14 that are operated by Frances’ Total. Shell already operates or participates in the exploration of 11 prospecting areas, or oil blocks, in Brazil.

“These are discoveries that are at an evaluation stage,” he told reporters during Brazil’s sixth annual auction of oil exploration and production licenses, where Shell bought two blocks jointly with Brazil’s state oil company Petrobras.

Shell is the only foreign company already producing oil in Brazil. Its Bijupira-Salema field, launched last year, is producing between 55,000 and 60,000 barrels per day after peaking at its project capacity of 80,000 earlier.

“It has peaked and started to decline. It is normal for deep waters where you produce as fast as you can,” Haney said.

Shell has been exporting all the oil pumped in Brazil, which Haney attributed to lower prices practiced in the Latin American country, where state-run Petrobras has been holding its oil products rates below international ones.

“It hasn’t been competitive. We’d be glad to sell here if it were,” he said, adding that he did not rule out local sales in the future. “We decide on each shipment individually.”

Haney said it was too early to tell whether Brazil could eventually oblige foreign companies to sell their oil locally following a Supreme Court injunction issued on Tuesday that suspended parts of the landmark 1997 Petroleum Law permitting exports of oil for foreign companies working in Brazil.

The court president on Tuesday overruled the injunction issued by one of the judges, but some doubts remained.

Nevertheless, Haney said it was natural for a country with a developing oil industry that opened to foreign participation only in 1998 to have such moments of confusion.

“We did not consider withdrawing from the auction due to the injunction but its suspension certainly provides more tranquillity,” he said.

Shell has invested about $400 million (220 million pounds) in Brazil since the opening of the sector.

Petrobras, in a consortium with Shell, paid the highest price in the first day of the auction of over 82 million reais (15 million pounds) for an Espirito Santo basin block that is close to Petrobras’ BES-100 area where it had already struck light oil. Shell has a 35 percent participation in the group.

The same group also bought two areas in the Campos basin.

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