Weekly Oil and Gas Notes: Petrobras’ Reserve Extension and BP’s Natural Gas Project

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The past week saw quite a few developments in the oil and gas space. Just a few days after it announced the extension of the Jupiter discovery in Santos Basin, Petrobras (NYSE:PBR) announced the extension of its oil and gas reserves in the Moita Bonita area discovered in 2012, which is expected to boost its net hydrocarbon reserves this year. On the other hand, BP Plc. (NYSE:BP) announced first gas from the DEKA project offshore Egypt, which involves the development of Denise and Karawan gas fields in Temsah Concession. Below, we provide an overview of each of these events and their potential impact on the respective companies.

Petrobras’ Reserve Extension

Petrobras’ exploration program in Brazil has been a huge success for the past few years. The company’s exploration success ratio in the domestic market has gone from just 59% in 2011 to 75% in 2013. Last week, Petrobras announced the extension of its oil and gas discovery in the Moita Bonita area, which is located in the BM-SEAL-10 block off the coast of the Brazil’s northeastern state of Sergipe. The news came just a few days after the company announced the extension of the Jupiter discovery in Santos Basin pre-salt block BM-S-24. [1]

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Petrobras struck first oil in the Moita Bonita area in 2012. However, the ultimate size of newly discovered oil and gas fields is determined by the wells drilled in years subsequent to the discovery. When such wells add to the proved area of a previously discovered reservoir, the increase in proved reserves is termed as an extension. In this case, Petrobras reported that Moita Bonita 3, the third well drill in the area, proved the extension of light oil and gas discovery made in 2012. It is located 82 km off the coast of Sergipe, approximately 5 km from discovery well Moita Bonita 1 at a water depth of 2,790 meters. [2]

Petrobras reported that the well confirmed the existence of 40-meter thick reservoirs with good permeability and porosity conditions that are key to the economics of hydrocarbon extraction. This is expected to boost the company’s net proved hydrocarbon reserves, which stood at 16.6 billion barrels of oil equivalent at the end of last year. To give some perspective on these numbers, Petrobras held enough hydrocarbon reserves at the end of 2013 to produce oil and gas for the next 20 years at last year’s production rates. [3]

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BP’s New Natural Gas Project

BP announced first gas production from the DEKA project offshore Egypt last week. The DEKA project is centered on the Denise and Karawan gas fields in Temsah Concession in the East Nile Delta. It started producing over 50 million cubic feet per day (MMcfd) of natural gas recently as the first development well, Denise South-6 came online. The entire project is expected to bring five subsea wells online along with the installation of subsea production systems, and sea lines to the El Gamil onshore gas plant. DEKA, which will primarily supply Egypt’s domestic market, is expected to produce 230 MMcfd of natural gas at its peak that should be reached early next year. [4]

This is expected to provide a boost to BP’s declining natural gas production from the Temsah concession. Last year, the company’s net share of natural gas production from the concession stood at just 30 MMcfd, compared to 34 and 74 MMcfd in 2012 and 2011, respectively. BP holds a 50% interest in the Temsah concession. [5]

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Notes:
  1. Fourth Jupiter Well Proves Extension of Santos Basin Pre-Salt Discovery, investidorpetrobras.com []
  2. Petrobras Proves Potential of Sergipe-Alagoas Basin’s Moita Bonita Area, investidorpetrobras.com []
  3. Petrobras 2013 20-F SEC Filing, sec.gov []
  4. BP Announces First Gas from DEKA Project, Offshore Egypt, bp.com []
  5. BP 2013 20-F SEC Filing, sec.gov []