Brazil Strikes Oil in Northeast, One of Most Promising Developments in 20 Years

The Brazilian National Petroleum Agency (ANP) announced on Monday, December 19, the discovery of a new oil frontier on the Brazilian coast. Geochemical studies on the coast of the northeastern Brazilian states of Pernambuco and Paraí­ba show the presence of hydrocarbons.

The size of the reserves has not yet been estimated, but the result of sample analysis was so positive that the National Petroleum Agency (ANP) has already classified the discovery as one of the most important among the 29 made in the last 20 years.

The concession for exploration of the area by domestic or foreign companies should be tendered next year, between September and October.

According to the Agency, 400 significant samples were collected in the sedimentary basin located on the coast between the states of Pernambuco and Paraí­ba.

The study, which was executed by private consultancy company HRT Petróleo, at the cost of US$ 5 million, identified evidence of the existence of oil both in shallow and deep waters.

According to ANP director John Forman, some of the samples collected show the presence of good quality light oil. On the foreign market, the so-called light oils have the highest values, as they demand lower refining investment than heavy oils.

"However, this does not mean that we are also going to find light oil in these areas. The oil may also be heavy or there may even only be natural gas," pondered Forman.

The discovery consolidates Pernambuco state’s position as an important Brazilian petrochemical hub. In October last year, an agreement signed between state-owned companies Petrobras, from Brazil, and PDVSA, from Venezuela, defined the construction of a refinery in the industrial complex of Suape, on the southern coast of the state, at the cost of US$ 2.5 billion.

With the refinery, industries of oil products have already announced their desire to establish branches in the area.

Tender

National oil reserves are considered property of the federal government according to the Brazilian legislation. Since the middle of the 1990’s, however, with the opening of the exploration market to private companies, tenders take place to define companies that will explore the concession.

The tenders are conducted by the National Energy Policy Council, an organization connected to the Ministry of Mines and Energy. The tender takes into consideration three factors: the bonus in reais (the Brazilian currency) paid by the company to the federal government for the right to operate the concession, the minimum investment that companies intend to make in exploration of the basins and the level of nationalization of equipment and services to be used in the productive process. The winning company receives a concession for 27 years.

From then, the concession holder executes complementary studies to determine the existence of oil or gas, and to decide on the production capacity and on the quality of the product. Figures supplied by the ANP show that on average, from the date of concession to the start of production, the time taken is ten years.

Anba – www.anba.com.br

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