Brazil's 4th Permanent Offer Bid Round awarded 48 blocks last December, 44 of them in the Pelotas Basin. In the same month, seven blocks were awarded in the neighboring Uruguay. Even though Uruguay offered fewer blocks, the total acreage of the awarded Uruguayan blocks is more than 88,000 square kilometers. The Pelotas Basin blocks awarded in Brazil cover almost 30,000 square kilometers. The rush by exploration and production (E&P) companies to secure positions in this vastly unexplored basin can be explained by the possibility of replicating exploration success in the Orange Basin, the Pelotas Basin's conjugate in Africa. More than 2.1 billion barrels of oil equivalent (boe) in recoverable reserves have been discovered in the Namibian sector of the Orange Basin in the past two years.

In Brazil, US major Chevron and Brazilian state giant Petrobras lead the pack in terms of acreage offered in the latest round. Chevron won 15 blocks in total, while Petrobras partnered up with the London-headquartered major Shell to secure 29 blocks, three of them including Chinese state giant CNOOC International as a partner. In Uruguay, Shell, Argentinian state player YPF, and independents APA Corporation and Challenger Energy Group are present.

Figure 1 below shows the location of the blocks and the winning consortia, with all exploration wells drilled in this region also highlighted. Little exploration work has been undertaken in the Pelotas Basin to date. In Brazil, a few wells have been drilled, all on the continental shelf, while beyond shallow waters, only seismic work has been done in Brazil. On the other hand, Uruguay has seen only one deepwater well drilled in the Pelotas Basin, Raya-1, which was drilled by French major TotalEnergies in 2016 and was dry.

Even though a new wave of licensing has come to this frontier basin, earmarked investments are still low. The minimum work commitment required by contract in Brazil for the recently awarded tracts is only seismic research, with companies not required to drill any wells.

Success in the Orange Basin points towards the potential in its analogs. The first well in the Orange Basin was a nearshore probe drilled in the 1970s, with all wells drilled in the basin over three decades being in water depths above 1,000 meters. All drilling in waters deeper than 1,000 meters occurred after 2013, and it took 15 wells to achieve the first deepwater discovery in the basin. Total investment in exploration in the Orange Basin in the past ten years is $1.7 billion, yielding numerous discoveries in the past two years.

Figure 2 below shows how, to achieve significant discoveries, companies had to go deeper in terms of both water depth and vertical drilling depth. Exploration activity in Namibia paid off after companies reached far from shore, in ultra-deep waters, and drilled wells deeper than 5,000 meters. The Pelotas Basin has not seen the exploration activity witnessed in the Orange Basin over the years. Raya-1 is the only well that comes close to the combination of factors that resulted in a discovery in Namibia, yet that well came up dry. However, looking only at the true vertical depth of a well can be misleading. Raya-1 targeted a shallower play, composed of Oligocene turbidites, and never reached a deeper section as in Namibia, where the discoveries were made in the Upper Cretaceous play. So, we still have not seen an exploration well targeting a similar formation to, for instance, Shell’s La Rona or Graff discoveries.  

The great advantage of the Pelotas Basin is that it has the largest depocenter along the entire margin, the likely major hydrocarbon kitchen that may have fed numerous oil and gas fields on the northernmost margin of Brazil. This system is ubiquitous on the continental margins of the South Atlantic Ocean. The sole discrepancy between these regions lies in the age of the principal source rock, which may vary between the Aptian and Turonian periods.

Authors: 

Flavio Menten

Analyst, Upstream Research, Brazil
flavio.menten@rystadenergy.com

Bruna Joia

Analyst, Upstream Research, Brazil
bruna.joia@rystadenergy.com

Gabrielle Ferreira

Client Success Manager, Brazil
gabrielle.ferreira@rystadenergy.com

Aatisha Mahajan

Vice President, Upstream Research
aatisha.mahajan@rystadenergy.com

(The data and forecasts in this column are Rystad Energy’s, and the opinions are of the authors.)