Brazil’s Petrobras Gets Contract to Explore Oil Off New Zealand’s Coast

Petrobras' rigNew Zealand’s Energy and Resources Minister Gerry Brownlee awarded his country’s first petroleum exploration permit over the Raukumara Basin off the North Island’s East Coast to Petrobras International Braspetro B.V.

“It is with great pleasure that I welcome, for the first time to our region, one of the biggest global players in the petroleum industry,” Mr Brownlee said.

“Petrobras is an international giant in this industry and a world leader in development of offshore drilling technology and production. Given Petrobras’s expertise, and financial and technical pedigree, this is an exciting step into areas of New Zealand until now unexplored.”

On 10 December 2008 the government released a blocks offer covering two permit areas over the basin. The offer closed on 28 January 2010. As the successful bidder, Petrobras has been awarded a five-year exploration permit, covering 12,333 square kilometers.

Mr Brownlee said the government was committed to unlocking the potential of the country’s frontier basins.

“Doing so will be an important part of a better future for all New Zealanders – bringing more jobs, more tax and royalty income, and most importantly, creating opportunities for long term regional development.

“To do this we need to attract investment from petroleum companies that have the capacity and capability to explore and build knowledge of our offshore basins.

“The government has a role in this through our ongoing data acquisition program. However, it is with the significant commitment by exploration companies in their work program bids that we will better understand the wider geology and potential of our petroleum resources, and move closer to realizing the commercial production potential of our offshore basins.”

Mr Brownlee said the announcement represented a major step forward in the relationship between New Zealand and Brazil.

“Petrobras’s investment will add a substantial new dimension to the economic relationship between New Zealand and Brazil. This is a very welcome development,” Mr Brownlee said.

New Zealand is keen to deepen its economic relationship with Brazil, which is the world’s eighth largest economy, with GDP of US$ 1.7 trillion.

“I look forward to a long and fruitful cooperation between New Zealand and Petrobras,” Mr Brownlee said.

Brazil’s state-owned oil and gas multinational Petrobras’s decision to pursue an exploration permit in the Raukumara Basin off the east coast of the North Island confirms the attractiveness of New Zealand to global oil producers says the Petroleum Exploration and Production Association (PEPANZ).

PEPANZ Executive Officer John Pfahlert said the Petrobras participation in the Raukumara blocks offer follows the company’s recent move to farm into a permit in Western Australia through a 50 percent stake in MEO’s offshore permit in the Carnarvon Basis.

“This participation in the Raukumara blocks clearly indicates they wish to have exposure to this part of the world and we welcome the announcement by the Minister of Energy and Resources, Gerry Brownlee that the permit has been awarded to Petrobras.”

Mr Pfahlert said Petrobras is the second significant new entrant to the New Zealand petroleum industry in recent months following the decision of U.S. major explorer Anadarko to take stakes in two Origin Energy offshore Canterbury Basin permits earlier this year, as it did earlier this month with U.S. company Global Resource Holdings in deepwater Taranaki lease.

“Petrobras controls significant oil and gas energy assets in 18 countries in Africa, North America, South America, Europe and Asia. These holdings, as well as properties in Brazil, give it total assets of US$ 133.5 billion (2008). It is Latin America’s largest company with 2008 sales of US$ 118.3 billion.”

The company was formed in 1953 by then Brazilian President Getúlio Vargas. While the company ceased to be Brazil’s legal oil monopoly in 1997, it remains a significant oil producer with output of more than two billion barrels of oil equivalent a day, as well as being a major producer of oil products. The company also owns oil refineries and oil tankers.

“Petrobras is a world leader in development of advanced technology from deep water and ultra-deep water production.”

He said the Government’s first promotion of Raukumara was three years ago when its Crown Minerals Group and GNS Science agencies contracted the CGG Veritas seismic vessel Duke to acquire about 1207 kilometers of 2D data over the area north of East Cape. The agencies also acquired magnetic data over the area.

Mr Pfahlert said the permit awarded to Petrobras came after a competitive tender allocation process under which a Petroleum Exploration Permit Block Offer is advertised and bids received and evaluated accordingly. Staged work program bidding, for exclusive exploration permits, is the primary form of allocation for such permits.

Petrobras International

Petrobras International Braspetro B.V. is a wholly-owned subsidiary of Petróleo Brasileiro S.A, and is responsible for carrying out exploration and production activities for its parent company.

Petróleo Brasileiro is the largest company in Latin America and the largest company to be headquartered in the southern hemisphere. It was incorporated in 1953 as a 100 per cent government-owned agency to undertake hydrocarbon activity in Brazil. Today the company is publicly listed on the Brazilian stock exchange but the government still holds a majority shareholding of 55 per cent.

Petrobras is one of the leading petroleum explorers in the world and has considerable experience in the offshore Brazilian Atlantic margin as well as holding tenements in onshore and offshore licenses in some 27 countries. It has proven production capacity of approximately 2.4 million barrels of oil per day from 112 production platforms and 15 refineries. Petrobras’s oil and gas reserves in 2008 were 15.1 billion barrels.

Petrobras has a downstream capacity of 6,000 service stations in Brazil and a further 1,000 abroad. As at 1 December 2009, Petrobras had a market capitalization of US$ 221 billion. Petrobras also operates the majority of the world’s 252 floating production, storage and offloading vessels, and has 58 drilling rigs leased out until 2013. Furthermore, Petrobras is heavily committed to research and development in the exploration and production industry by having partnerships with 120 universities and 70 research centers and institutions globally.

The Raukumara Blocks Offer was announced on 10 December 2008 and closed on 28 January 2010. Potential investors were given 13 months to formulate their bids, which included specifying the work program each bidder intended to carry out in relation to each block.

Evaluation of bids included a rigorous assessment of the work program to ensure it was a robust bid supported by the financial and technical capability needed to give effect to the work program.

The work bid is evaluated in accordance with the Crown Minerals Act 1991, the Minerals program for Petroleum (2005), the Blocks Offer Notice and the charter document.

Petrobras has been awarded a five-year petroleum exploration permit to ascertain the prospects of the permit area to enable a decision to be made whether to continue exploration of the area, apply for a mining permit for discoveries made, or surrender the permit.

Petrobras’ work program milestones include:

* acquiring 3,000 kilometers of two-dimensional seismic data within 18 months
* interpreting the 3,000 kilometers of two-dimensional seismic data within 24 months
* an option to surrender after interpretation of two-dimensional seismic data
* acquiring 800 square kilometers of three-dimensional seismic within 36 months
* interpreting the 800 square kilometers of three-dimensional seismic data within 42 months
* an option to surrender after interpretation of three-dimensional seismic data
* drill one well within 60 months

The estimated costs associated with the work bid are:

* US$ 5 million for the two-dimensional seismic data
* US$ 7 million for the three-dimensional seismic data
* US$ 106 million to drill one well

What is the known production potential of the area?

The Raukumara Basin is a totally unexplored frontier basin, where no commercial activity has previously been undertaken. In 2005 the Crown acquired some initial seismic data over the area, which was made available as part of the blocks offer.

The seismic data, further modeling of the area and comparison to the onshore geology indicates there are sediments up to 11 kilometers thick in the basin along with potential sand reservoirs over the area that are key elements necessary for hydrocarbons to be formed in the basin and trapped in commercial quantities. A number of sea surface slicks add to the positive expectations for this basin, as do the many oil and gas seeps over the adjacent onshore region.

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