Kezorm

Increased Oil Prices Result in Record Profits for Petrobras

Things are sweet for Brazil:

www.bloomberg.com/apps...

Petrobras: Great for Brazil, Not So Great for Shareholders

"Contrariwise, if Exxon find a big, porous oil sand, then my reputation is toast."

Enough oil and porosity makes the sand optional... but if you provide that "toast", I'll provide the tea. :)

Petrobras: Great for Brazil, Not So Great for Shareholders

"one drillship well for reconnaisance, dry hole cost split with Hess." I wrote to Hess and West Polaris will drill t-w-o holes... one after another. And why were these holes going to be "market makers" (drilled by grown-ups...) when you first brought it up, but now... they are going to be "dry"?

No one claimed to calculate reserves based on grav or mag. The link was provided to answer the question: "what is so special about BM-S-22 ?"

Honestly V, do you think that Exxon would not have bothered planning these two holes if they had talked to you first? In your judgement, are they wasting their time? If not, why not? Is it possible that the holes WILL be "market makers" ? And if they meet that standard, will the previous 15 Petrobras finds contribute to the big picture, or will Exxon need redrill them all before you will admit that a hole is a hole and a find is find no matter who drills it?

Petrobras: Great for Brazil, Not So Great for Shareholders

enerving... I think you meant billions, not millions regarding the new PBR discovery.

Petrobras: Great for Brazil, Not So Great for Shareholders

Enervingmarkets, to your question regarding the BM-S-22 block, see this 2002 publication:
www.searchanddiscovery...

Read it carefully as it answers your questions about why that block might be something special. Note that this was published before exploratory drilling had penetrated the salt layer in adjacent areas, finding major hydrocarbon reservoirs like Tupi.

Petrobras: Great for Brazil, Not So Great for Shareholders

AvA,
You are as economical with impartiality as you claim Estrella is with truth. Numerous on-line oil industry publications have reported the reserve estimates for Tupi. Are they all idiots? Are you the only one who sees through a facade? Is Brazil wasting it's money contracting for all those drilling rigs and is Exxon (the grown-ups remember...) wasting their money drilling at BM-S-22?

Petrobras: Great for Brazil, Not So Great for Shareholders

www.offshore-mag.com/d.../

Note that the article has 6 web pages. The comment about 15 wells drilled and 15 finding hydrocarbons is on the bottom of the first page.

excerpt:

Besides affirming that there is no technical barrier to explore under the salt layer, Guilherme Estrella, Petrobras’ E&P director, argues that there must be change in the sector’s regulations because the pre-salt exploration can be seen as low risk exploration activity. According to Petrobras, the discovery of the blockbuster natural gas and condensate field in the Jupiter area in the Santos basin reinforces the notion that there is practically no exploratory risk in the pre-salt layer.

“Of the 15 wells we drilled during the last two years in the pre-salt, each one of them struck oil or gas. In fact, we have been drilling in the pre-salt area since we started drilling in Campos basin,” he says. “All of the pre-salt blocks achieved exploratory success, something that confirms the region’s high prospectivity.”

Estrella, a geologist, is former head of Cenpes, Petrobras’ R&D center.

end of excerpt.

I'd still like an answer from you on why it will be a "market maker" if Exxon announces a find after all these other finds made by PBR ? Why does it only count if Exxon makes a find? What does it take to be a "grown up"? What qualifies you to make such a comment?

Petrobras: Great for Brazil, Not So Great for Shareholders

AvA, your comment about "grown-ups" is, well,... childish and offensive. Offensive because Brazil's fifteen sub-salt successes out of fifteen attempts FAILED to impress you, while one well soon to be sunk by Exxon will be a "market mover." Such arrogance. How do you justify that? I sure hope you are not a citizen of the USA since that obligates me to apologize for your rudeness and ignorance.

Transocean: Drilling For Profits

Leonard, wonderful article. Refreshing for it's lack of hyperbole. The statistic you mentioned about RIG having 7 of the 15 deep-water rigs that will be available between now and 2010 was especially interesting. These rigs are badly needed in Brazilian and Mexican waters, if not elsewhere. I suspect they will be contracted for excellent rates.

One thing you did not mention, which I think would have been worthy of mention, is the recent depth record in Qatar - something like 40,000 feet of reach drilled without incident in 36 days! What an advertisement for "getting-what-you-pay-... !

To Startouch, I would hope that crews are routinely evacuated before killer storms arrive. If so, the loss of one rig would be bad for any company, but the vast size of Transocean would hopefully allow them to weather such a loss somewhat better than their smaller competitors.

Petrobras: Extremely Overvalued

Lifting costs for oil at Tupi. Around $8 per barrel.

www.reuters.com/articl...

Compare the above projections to Von Altendorf:

"Amortizing exploration and infrastructure, Tupi-Carioca lifting costs may be as little as $40/barrel if they produce 5+ billion barrels, or as high as $80/barrel if reservoirs are compartmentalized."

I concur with Anaconda that this was a hit piece. There are links to this article all over the internet and they give an impression of Petrobras that is utterly false.

Petrobras: Extremely Overvalued

Long, long ago in 2002 some geologists were very excited about the Brazilian sub-salt. Read this for background:

www.searchanddiscovery...

Since this was written at least 8, possibly 11 or even 15 holes (depending on the vintage of the article) have been drilled through the deep salt and producible hydrocarbons were found every time. Of the several recent announcements of oil, they have found oil with similar viscosity leading some to suspect potential linkage between reservoirs or even one extremely large reservoir. Given the seismic images in the articles, it seems there may indeed be giant systems spanning tens of miles.

The author may be confused or befuddled about some things. Here are some examples:

Altendorf: "Tupi and Carioca..... It is inconceivable that large scale production development can be achieved in less than 10 years."

OK. So they might not have a hundred wells producing for ten years. So what. Investor's seek growth and opportunity. But this comment should be compared to Brazil's previous accomplishments at disproving the critics. Look at the 4th paragraph of this article recalling the development of the Campos basin:

www.rigzone.com/news/a...

excerpt:
"Pressured by high oil import costs and by the urgent need to trim Brazilian dependence on imported oil, it was at this basin (Campos) that Petrobras created one of the most advanced production development concepts in the world, one that would serve as a model for the industry. Seeking to slash the delay between discovery and production, company technicians opted to install the first Anticipated Production System (APS) on a floating platform in Enchova. The conventional offshore production systems adopted the world over had a very long maturation time, ranging from four to six years. With the APS, the delay between discovery and early production was slashed to a mere four months, leading to great agility, operating flexibility and huge savings in investments. This allowed the company to kick production off while definitive fixed platforms, which would be installed later on, were under construction."

Fred's comment: One can assume that PBR engineers are even more capable, confident and experienced today.

Altendorf: "Tupi and Carioca are geologically unrelated to oil-producing Campos reservoirs in a younger formation...."

Santos Basin, Campos Basin. Two different structures. Are you correcting your own misperception here? Or are you implying some dishonesty or exageration on the part of PBR?

www.rigzone.com/news/i...

Altendorf: "...and in contrast they are primarily gas plays because of burial age and maturation in a high temperature-high pressure environment."

PBR found oil. They intend to produce - oil. And where they found mostly gas, as at Jupiter, they stated that. You seem to think that the theory you were taught once upon a time is more important than what they are actually finding. By implying they are reporting oil when they only, actually found gas...is to basically impugn the honesty of PBR and every journalist who has reported on the subject. Is everyone missing something?

But the maturation issue is important. Everyone schooled in petroleum geology decades ago was taught about oil depth and temperature windows, below which or beyond which it would be silly to look because the oil would presumably... have been cooked to gas. But oil is where you find it and of late, it is being found at depths where they used to say it could not be. Arthur Eddington once said that "no fact should be accepted until confirmed by theory." I guess you are in Arthur's camp in this regard. But dozens of articles are reporting the API degrees (viscosity) of the oil being found and that is a rather brazen lie if all they are finding is natural gas.

Temperature? 400 degrees does not melt steel, and PBR is researching products made by companies like Aspen Aerogel who make efficient insulation systems for pipes that will keep the oil warm till it gets to the surface - which is an important point - you want it to stay warm until you get it to your separator. That way paraffins stay dissolved, and the lower viscosity encourages flow.

Here are articles that seem more careful or honest:

www.aapg.org/explorer/...

www.reuters.com/articl...

In summary, the Brazilian ANP has removed 41 blocks from auction surrounding the BM-S-8,9,21 and 22 area. And they have gone on a shopping spree for drilling rigs. In order for your criticisms to be taken seriously requires us to believe that this is all merely a show, and that the recent discoveries do not actually make PBR a better investment than another company which does not even claim to be making such discoveries. But even that does not make sense for XOM will be drilling at BM-S-22 this year, and are we to believe that they would change their plans about that if only they had your insights on the matter?

Petrobras is Hoarding the World's Deep Sea Drillers

Regarding a correction to $110... it is possible that won't happen. Consider Goldman's prediction of a $141 barrel cost average for the 2nd half of the year. If Goldman sees the imbalance of supply and demand sufficient to drive the price that high, then there may be too much tension in the rope, so to speak, to enable a correction as deep as $110.

Petroleo Brasileiro: Reality Begins to Bite

Dear Otto and Ames, please keep up the propaganda. The buying opportunities for PBR, RIG and POT are priceless. Seriously, this talk about the difficulty of getting oil to the surface needs some perspective. Consider the "difficulty" of pumping Saudi oil, taking all the salt water out of it, putting it on ships, and then sailing 12,000 miles to another set of refineries and pipelines, before finally arriving at your gas station. Frankly, I think drilling a couple miles deeper than normal sounds pretty lame compared to the rest of the chain... which has become so routine no one pays much attention.

PBR official have discussed the likely production costs. They think it will cost $25 per barrel to produce. Which will be a real drag on profits when oil falls to $50 per barrel. Make sure you wake me up when that happens.

In the past week or so we have heard Russia admit they will struggle to maintain production at 9 Mbpd. Mexico warns that their production will decline at around 8% per year and their exports even more as home consumption increases. And the Saudi's have announced that they do not plan to produce much more oil per day even when their capacity rises to 12 Mbpd in a few years. Meanwhile, China's oil consumption has risen 8% this past year, India's probably also and the emerging markets together are now drinking more oil than the USA.

That sound is not a bubble breaking. It is cavitation as the HMS Hubbert's Peak cranks up its screws and prepares to head out to sea, pausing to limit the wake while rounding the Iraq production buoy, then hydroplaning out into open sea leaving commodities shorts sliced and diced as if by a Ginsu. But wait! There's more!

www.searchanddiscovery...

This link takes you back 6 years. Look at the domed structure peaking at BM-S-22 where Hess holds a 40% claim. Since this article appeared, Petrobras has drilled 11 holes through the salt and hit oil, gas or valuable condensates EVERY time! This talk about precision targeting is either hogwash, or the Brazilians have a divining rod confirming Lula's speculation that God must be Brazilian. Eleven holes, eleven finds. It is no wonder that in December Brazil announced that they were taking 41 nearby claim blocks off auction.

Heebner is right. Pass the salt.