Shell Brazil CEO Is Optimistic About Brazil’s E&P Future

RIO DE JANEIRO—For Royal Dutch Shell, 2017 was a good year in terms of E&P activities in Brazil. Ranking as the second largest oil-producing company in Brazil, after acquiring BG Group’s assets in the country, the British-Dutch major increased its oil output by 12% to 330,000 barrels of oil equivalent per day compared to 2016.

Also, Shell Brazil made important moves to take advantage of opportunities in the country’s upstream segment. Shell Brazil acquired in 2017 three promising presalt fields in the Santos Basin—South Gato do Mato, Sapinhoá and West Alto Cabo Frio. Shell plans to begin drilling in the South Gato do Mato Field, where the company will work as operator, in 2019.

Currently, the Netherlands-headquartered company has stake in 13 offshore blocks and four onshore blocks. But the company intends to expand its operations in Brazil over the next few years. In an exclusive interview with Hart Energy, Shell Brazil CEO André Araújo shared his thoughts, which have been edited for clarity, about the company’s plans and expectations for its future in Brazil’s oil and gas segment.

How was 2017 for Shell’s activities in Brazil?

Araújo: We can say that in 2017 there were some important advances created in the Brazilian oil and gas industry, especially with improvement of the regulatory framework agenda that approved important changes such as in the local content rules and in the presalt sharing regime. The three oil fields auctions and the announcement of a calendar of auctions in 2018 and 2019 also brought a great sense of predictability for the industry. We realize that Brazil’s government and Brazil’s oil regulator are listening to the industry’s claims. They are working hard to ensure that the agenda for the upcoming year is very hot.

As for Shell, it was an important year to consolidate the company’s portfolio in Brazil. We made an excellent acquisition in the presalt auction in October when we became an operator in one of the most promising regions in the world for E&P.

Recently, Brazil’s oil regulator said the country can reach 5 million oil barrels per day by 2027. Can Shell contribute to this production goal?

Araújo: Shell is Brazil’s second [largest] oil-producing company after Petrobras. We expect to increase our portfolio in the country, so it is natural that our contribution will be greater. This process will take the company to a new level. It will increase our responsibility and will demand even more hard work from all of us. We have new areas to develop, explore and produce, not to mention the assets already in operation, which are very important for Shell. That will demand a large amount of investments.

Talking about investments, in September 2017 it was announced that Shell will invest US$2 billion in Brazil per year between 2017 and 2020. Will you talk more about this?

Araújo: This is a very impressive amount of investment and it makes us one of the largest foreign investors in Brazil. But the total investment in Brazil will be even higher since this amount of investment does not include the assets acquired in the presalt auction in October 2017.

Parque das Conchas in the Campos Basin is Shell’s most important asset in Brazil. How have the company’s activities in the Abalone, Argonauta, Ostra, Bijupira and Salema fields located in Parque das Conchas area fared?

Araújo: The Abalone, Argonauta and Ostra oil fields are part of Parque das Conchas in the Campos Basin, where Shell performs as the operator. Those three fields began producing oil in 2009. Parque das Conchas is already in the third phase of development. Also in the Campos Basin, Bijupirá and Salema is a mature field of great importance among our assets. We have deployed R&D projects focused on enhancing oil recovery and expanding the life of risers, which will certainly support Shell to maintain positive results on our assets.

What is the contribution of these assets to Brazil’s total output?

Araújo: The Parque das Conchas Field (BC-10) is a project that Shell is very proud. It is an important milestone in the development and commercialization of deepwater oil in Brazil. Bijupirá & Salema has historical importance not only for the company but for Brazil. It was in this field that Shell became the first foreign company to produce oil on a commercial scale in the country after the opening of the domestic market [in 1997].

How is Shell performing in the natural gas market in Brazil? Can the former BG’s assets contribute to increasing natural gas production in Brazil?

Araújo: The acquisition of BG had a transformative effect for Shell in Brazil, as we incorporated important assets that enabled the company’s participation in the natural gas market, with a significant increase in our production. Natural gas is a priority for the group, and we look with great interest on these assets and the integration of the energy market.

Can acquisition of the South Gato do Mato, Sapinhoá and West Alto Cabo Frio southern presalt fields contribute to the company’s oil and natural gas volumes?

Araújo: It is still premature to estimate their volume, but our expectation is great. These are important deepwater projects in the presalt that can put Shell in an even bigger position in Brazil’s oil and gas market. We are already working to develop these two large additions to our portfolio.