(Valor) In a strategic repositioning process, with an eye on the energy transition, Equinor decided to halve the number of countries where it operates in the oil and gas sector. In Brazil, on the contrary, the idea is to continue to grow. After announcing, this year, investments of US$ 8 billion – together with ExxonMobil and Petrogal – to start production in the Bacalhau field, in the pre-salt of the Santos Basin, the Norwegian oil company is working on the development of new projects until 2030, and looks carefully at the auction of surplus volumes from the transfer of rights in the areas of Sépia and Atapu, scheduled for December 17th.
Equinor is one of eleven companies qualified for the round, which will demand disbursements of R$ 11.1 billion in signing bonuses. On a visit to Brazil last week, the executive vice president for the international area of exploration and production at Equinor, Al Cook, sees Sépia and Atapu as “great fields”, of the type “that any oil company and gas in the world look”. The decision to participate in the bidding, however, will depend on the return calculations.
“We will base our decision on how we can generate value,” said the executive, in an exclusive interview to Valor.
Surpluses are discovered volumes of oil that exceed the 5 billion barrels that Petrobras has the right to produce in the pre-salt, as part of the transfer of rights contract signed in 2010.
In 2019, the government unsuccessfully offered the surpluses from the Sepia and Atapu fields. At the time, the oil companies saw many risks associated with the tender – the main one being the need to negotiate with Petrobras, after the auction, the value of the financial compensation for the investments made in the assets.
With the failure, the government revised some rules. The main news is that, after negotiations between Petrobras and Pré-Sal Petróleo SA (PPSA), the amount of compensation to be paid to the Brazilian oil company was calculated in advance. In addition, bonuses were reduced by 70% compared to the terms of the 2019 bid.
Al Cook comments that, since then, the industry has undergone a profound transformation after the outbreak of the pandemic. He cites that the oil companies’ commitments to emission reductions have increased. “But what remains the same is the quality of Brazil’s assets,” he said.
Sepia and Atapu’s bidding takes place at a time when the Senate is debating on the taxation of oil exports, to finance the creation of a fuel price stabilization fund. Equinor does not comment on the matter. In a statement, the Brazilian Petroleum Institute (IBP) warns, however, that, if approved in Congress, the proposal has a negative impact on ongoing and future projects and reduces the attractiveness of new auctions.
Al Cook reinforced that the merit of the Sepia and Atapu auction is that the assets are in the production phase. “For us, the combination of assets in production and development is what makes Brazil so attractive,” he said.
Since 2017, Equinor has halved the number of countries where it operates in oil and gas exploration and production, to 15. The company is leaving Australia, Mexico, Ireland and Nicaragua. Brazil, on the other hand, is among the three main destinations for the company’s investments. “In the countries where we stay, we are really going to invest, to make a difference,” he said.
The Norwegians seeks projects with rates of return above 20%, in a scenario of oil at US$ 60, and fields with carbon intensity below 8 kg of CO2 per barrel. The company bets on assets with a quick return and that have a breakeven price below US$ 35 a barrel.
Bacalhau is one of the main assets in the company’s project portfolio. The field’s first platform, at 220,000 barrels/day, should start producing in 2024. The second production unit is expected to come on stream by the end of the decade, but the project’s progress still depends on the drilling campaign in the north. of the area. Drilling in the region, according to him, will help to increase knowledge about the reservoirs and “will tell you what can be done” in the design of the project.”
For 2022, Equinor expects to start, in the first half, phase 2 of Peregrino, operated by the company in the Campos Basin post-salt. The project, which was delayed due to the pandemic, consists of the installation of a third fixed platform that will allow reaching reservoirs that were previously inaccessible. The idea is to increase the productive life of the field and add up to 300 million barrels of recoverable reserves.
Today, the company has two operating assets. In addition to operating Peregrino, Equinor is a partner in Petrobras, with 25%, in Roncador – a mature field in which the Norwegian company has conversations with the Brazilian company to advance on a revitalization project. According to Al Cook, the companies managed to reduce the costs of the project’s wells by 50%. “It gives us confidence for the next steps,” he said.
Another important asset within the company’s portfolio is the discovery of natural gas from Pão de Açúcar, in the Campos Basin. The big challenge is gas monetization. The final investment decision must be taken in 2023.
Equinor produces 33 thousand barrels/day of oil in Brazil. The multinational even announced plans to produce between 300,000 and 500,000 barrels/day in the country by 2030. Al Cook, however, adopts a more cautious speech. “We are not pursuing production volumes, but [value generation] goals.”
On the exploration side, he says that the last drillings carried out by the company, in the country, did not have the expected success. The company is now focused on processing the knowledge acquired in drilling, before advancing on new campaigns.