John Waggoner • Houston
Brazil’s OGX launches drilling debut
Brazil’s largest independent oil and gas company in terms of offshore acreage has launched its initial exploratory campaign.
Startup operator OGX raised $4.1 billion in last year’s initial public offering despite the fact it has yet to produce any oil. The record-setting IPO set the stage for the first serious local contender to compete with heavyweights such as national oil company Petrobras.
Campos basin.
During Brazil’s ninth oil and gas licensing round, OGX acquired concession blocks covering approximately 7,000 sq km (1.7 million acres). Hoping to pursue additional growth opportunities, the company also has a farm-in agreement for a 50% participating interest in an exploration block in the Santos basin, totaling 6,800 square km (1.68 million acres).
The acreage includes 21 high-potential exploratory blocks in the Campos, Santos, Espírito Santo, and Pará-Maranhão basins.
Based on an appraisal by DeGolyer & MacNaughton, this acreage contains prospective resources of 20.180 Bboe and natural gas, and net risked prospective resources of 4.835 Bboe. The net risked prospective resources assume a 27% probability of exploratory success. However, the exploration team at OGX believes that the average success rate could be closer to 50%.
Santos basin.
Enthusiasm over these prospects has been buoyed in part by the composition of the company’s management team, whose influence and experience extend through the highest echelons of Brazil’s corporate and political spheres.
Founded by Brazilian mega-investor Eike Batista, OGX has brought together top engineers selectively recruited from Petrobras, a management team with extensive experience in the energy industry, and a board of directors that includes two former energy ministers, one former finance minister, and one former president of Petrobras.
“We plan to drill 51 wells in the next four years in order to prove our oil and gas reserves while developing our initial discoveries,” says CEO Rodolfo Landim.
The company expects to begin drilling in Santos with partner Maersk Oil by the end of 2Q 2009. Drilling will begin on two wells in Campos once the rigs are delivered in September.
“Upon completion of the first two wells operated by OGX, we expect to begin drilling two additional prospects in the Campos basin which will most likely begin towards the end of 2009 and continue into early 2010. Our sixth well scheduled for 2009 will be in the Santos basin and should start in November after we receive our third rig,” says Landim.
Milestones at a glance
In the past six months OGX has completed a 3D seismic campaign, hired four semis, chartered six vessels and two helicopters for logistical support, contracted an onshore base, acquired all critical drilling materials and built a state-of-the-art 3D visualization center. While the drilling program was accelerated ahead of its initial schedule, Landim says costs have been contained.
- Seismic: 3D seismic data shooting in the Campos and Pará-Maranhão basins was completed in December 2008. Seismic acquisition in the Espírito Santo blocks is seven months ahead of the original timetable. Existing 3D seismic data for Santos basin was enhanced for interpretation, which is scheduled to be complete by mid-2009 for the Campos, Santos, and Pará- Maranhão basins, while Espírito Santo will be ready by December 2009.
- Drilling rigs: OGX hired four semisubmersible rigs, three of them from Diamond Offshore and one from Pride International. Two rigs are starting in September 2009, another will begin in October, and the last one is scheduled to start in the beginning of 2010, but could start earlier.
- Logistics: So far OGX has chartered six vessels, five of which are being built in Brazil, and two helicopters to service rigs in Campos and Santos. Suppliers include Edison Chouest, Norskan Offshore, and Aeróleo. OGX also secured with Briclog its onshore supply base in the city of Rio de Janeiro.
- Drilling services and equipment: All materials, services and equipment have been secured, including wellheads from Vetco, casing from V&M do Brasil, and drilling fluid from MI-SWACO. OGX has retained engineering services from Schlumberger and Halliburton, and casing running services from Frank’s International.
- 3D visualization: OGX built a state-of-the-art visualization center at their Rio de Janeiro headquarters to further enhance integration between teams of specialists, improve decision-making, and increase productivity.
