By Dom Phillips
In its quest for discoveries, the oil industry is heading into deeper and deeper waters. And Brazil, with a potential 30 billion barrels of oil discovered since 2006 in two vast, deepwater ‘sub-salt’ fields - the Campos and Santos Basins - is its new frontier.
But the technical and logistical challenges involved in tapping this oil are immense - the oil is under a layer of salt as far below the waves as commercial jetliners cruise above them. As a result, Petrobras (NYSE:PBR), the Brazilian oil giant with a 30% stake in all sub-salt concessions, predicts that between 2011-2015, it will make $224.7 billion in investments - $127.5 billion of which is for exploration and production.
The fruits of those investments are already visible in the floating frontier towns.
“It is really impressive what is out here, 100km off the shore,” said Willem Van Beek, a Dutch “mud engineer” who drills the wells, from an oil platform at Espiríto Santos Basin recently. “It’s like a complete offshore city. You see thousands and thousands of lights.”
With reserves this big, Brazil is experiencing an oil boom: 50,000 people were at the Brazil Offshore bi-annual conference in the oil town of Macaé, in June this year. “Brazil is the biggest new front for oil in the world,” said Petrobras CEO José Gabrielli.
New Technology Needed
Helped by its sub-salt finds, Petrobras plans to more than double production from its current 2.772 million barrels of oil equivalent a day (boe/d) to 6.418 boe/d million by 2020, Gabrielli said at a conference two weeks ago.
Sub-salt oil, responsible for just 2 percent of Petrobras production today, will provide 40 percent of output by 2020. At that point, Brazil will be exporting 2 million barrels of oil per day day, according to Magda Chambriard, Director of Brazil’s National Petroleum Agency (Agência Nacional do Petróleo, or ANP). That’s about 10 percent of American daily consumption in 2009, the last year for which numbers are available.
But first, they have to get to the oil, which is hundreds of kilometers off the coast and deep underground. The technology to see into the oil formations, which distort seismic sound waves, did not exist until the early 1990s, when the independent oil company Anadarko developed 3-D seismic probes using supercomputers.
Brazil’s platforms and rigs sit above 2,000 meters of water. The oil is anywhere between 2,000-7,000 meters below the sea bed and to get to it, engineers must drill through clay, then a variety of geographical formations like shale or calcium carbonate, before they hit a thick later of salt that can be thousands of meters thick.
“You have to develop new technology,” says Norman Gall, Executive Director of the Fernand Braudel Institute of World Economy (Instituto Fernand Braudel de Economia Mundial) in São Paulo, and a sub-salt expert. “You have to deal with processing the oil at these depths. You have all of these problems. That’s why it’s so expensive.”
Up to 350 km from the coast, the salt beds in the Santos Basin are beyond the reach of most helicopters so platforms must be built halfway between the coast and oil field. Once there, drillers face huge challenges, Gall wrote earlier this year in Brazil’s Estado de São Paulo newspaper. “The salt beds are unstable and can engulf the drill bit and collapse the casing that encloses the drill pipe.”
Underneath the salt, it doesn’t get any easier, according to Van Beek, the Dutch mud engineer. The formations are unstable and the oil is generally mixed with sand, he says. “The spaces in between the sand grains hold the oil. So when you start producing a well, you use sand control, which means you suck in the oil and leave the sand out.”
But at depths like these, the water is close to freezing. “The temperature changes the viscosity of the drilling fluid,” says Van Beek. This, in turn, affects the oil, which is “very thick, like a syrup. The way to make it more fluid is by heating it up. They do injection wells. When you produce oil you produce gas. The gas is on top of the oil, so you pump it back in at the bottom of the reservoir and it forces the oil up.”
Out on the oil field, in the midst of the floating cities, are the enormous production platforms – called, in the dense lexicon of offshore production, FPSO’s (Floating Production Storage & Offloading vessels). The FPSO sits above a network of wells, connected on the seabed to an interchange of pipes and hubs called a Christmas tree. This undersea equipment is maintained by robots, which are stored in an undersea garage.
Deep under the seabed, the oil formation contains a mixture of oil, gas and water, which is pumped to the storage vessel and separated. “They lose a lot of money bringing up water and gas up to the surface, that’s a tremendous cost, to then be re-injected into the wells,” says Gall.
The goal now is to move this processing under the sea. At its research centers like the giant CENPES, at the Federal University of Rio, Petrobras is developing technology to separate oil from water, gas and water on the seabed as part of a move to completely automate processing. Carlos Fraga, CENPES executive manager, told Brazil’s Valor Econômico newspaper that he would like to eliminate the need production platforms within a decade.
FMC Technologies plans to start operating a sub-sea separation unit for Petrobras in the Marlim Field, in the Campos Basin, later this year. “This is new technology, and these systems are supposed to run for 20 years, which is the life of an oil field,” says Gall.
Dangers and Opportunities
Beyond the technological challenges is the ever-present risk of a major accident, like the Deepwater Horizon disaster of April 2010, which claimed the lives of 11 crew and caused serious environmental damage.
As Norman Gall observes, the Deepwater Horizon was about half the distance from the coast as the Santos Basin field. “The chances of both saving lives and equipment at this distance from the coast are greatly reduced,” Gall says.
Nevertheless, the lure of billions of barrels of oil and billions in investment will no doubt prove irresistible.
Brazil's Oil Frontier: Sub-salt drilling could net billions of barrels
By Dom Phillips