From 2000 to 2023, Brazil’s oil and gas production grew at a compound annual growth rate (CAGR) of 4.8%, and this is expected to accelerate to 6.3% between 2024 to 2030 (Figure 1). This growth is primarily driven by the Santos Basin, where output has surged since the first pre-salt ultra-deepwater discovery in 2006, leading to the development of giant fields like Tupi and Buzios. Last year, the basin accounted for 74% of Brazil’s total output and is forecast to contribute 80% by 2030.  However, after this production peak, Brazil’s output is projected to decline by an average of 10% annually through 2050.

Meanwhile, the Campos Basin, which dominated Brazil’s offshore sector before the pre-salt developments, deserves recognition for its resilience. It has been producing for over 45 years, thanks to life extension projects at fields such as Marlim, where last year, nine platforms were replaced by two new floating production, storage, and offloading units (FPSOs) as part of its revitalization program. Several previously producing wells will be reconnected to the Anita Garibaldi and Anna Nery FPSOs, which will be able to sustain higher water cuts due to their higher water processing capacity.

Continuous exploration has led to steady production growth in Brazil for over 70 years. However, alarmingly, the average number of wildcats drilled in the past 10 years has fallen to the same level as in the 1950s, highlighting the challenge of reserves replacement. ILX offers a promising solution to this challenge by leveraging existing infrastructure to develop smaller discovered accumulations.

Brazil's ILX potential

ILX can capitalize on existing infrastructure, lowering the minimum economic field size (MEF) threshold for new developments. These developments can come from new satellite discoveries, new accumulations in unexplored blocks, or targeting different formations.

Compared to other basins with ILX potential, Brazil’s Campos and Santos basins rank among the top 10 globally in terms of spare capacity. The existing available infrastructure in these basins reduces costs and enables developments that would not be profitable without the transportation and processing networks already in place.

For a discovery with 15 million barrels of oil equivalent, the estimated oil breakeven price is $34.5 for the Campos Basin and $40.9 for the Santos Basin. In a 60 million barrels of oil equivalent discovery scenario, those breakevens go down to $26.7 for the Campos Basin and $31 for the Santos Basin. These values show how competitive ILX developments can be and highlight how small reserves can be commercially viable when utilizing the available spare capacity of existing infrastructure.

Independent players currently operate a small portion of Brazil’s production, but most of their output comes from mature fields. As these players consolidate, they could play an important role in ILX by driving exploration near existing infrastructure.

ILX solutions

Brazil accounts for 45 of the 167 FPSOs operating worldwide, and 15 of the 36 FPSOs on order are destined for the country, representing over 40% of global demand. Brazil's established FPSO market, combined with its expertise in deepwater developments, allows companies to consider redeploying FPSOs to commercialize undeveloped projects.

Tie-backs also offer a technological solution by utilizing a single hub to develop smaller accumulations near existing producing fields. This is already being implemented offshore Brazil, as seen with PRIO’s Wahoo project in the Campos Basin. The project involves the 30-kilometer tie-back of the Wahoo field to the FPSO Valente at the Frade field, with the first production expected in the first half of 2025.

Another opportunity lies in revisiting previously relinquished discoveries that could be developed by leveraging existing infrastructure. The Campos and Santos basins contain over 40 fields with more than 3 billion barrels of oil equivalent in relinquished discoveries, highlighting the untapped opportunities in the region and the fact the exploration potential of these basins is far from over. However, regulatory agencies play an important role in developing these discovered but relinquished resources. For ILX developments to move forward in these blocks, Brazil's National Petroleum Agency (ANP) would need to offer them in future bid rounds or permanent offers. Additionally, regulations around infrastructure sharing need to be developed to ensure efficiency gains across all operators in the region.

Water challenge

A significant challenge for ILX developments is managing water production. As a basin matures, more water is produced alongside the oil, and it takes a portion of the processing capacity of the infrastructure. As a result, new platforms with higher water processing capabilities are required, as seen with the aforementioned Marlim revitalization project. Since 2015, the Campos Basin has produced more water than oil, with most fields producing the final quarter of their reserves. In contrast, water production in Santos Basin remains low as most of its fields are in the early stages of their life cycles.

Some post-salt fields in the Campos Basin may hold upside potential by targeting pre-salt volumes, as seen with the mature Albacora field, which started production in 1987. As part of its revitalization, a new FPSO will be deployed at the field, with the capacity to produce up to 120,000 barrels per day (bpd) from post-salt and pre-salt reservoirs. It is also understood that the FPSO will be able to handle 130,000 bpd of water and store up to 1.2 million barrels of oil.

Slowing the decline

While the near-term production outlook for Brazil is bright, the country is at a critical juncture, with a decline expected to begin in the next decade. However, ILX offers a promising solution to help stem the decline by leveraging existing infrastructure and developing smaller, undeveloped accumulations. As Brazil's oil and gas industry continues to evolve, it is essential that all stakeholders, including government agencies, regulatory bodies and private companies, work together to create a supportive environment for ILX developments. With the right policies and incentives in place, ILX can play a significant role in addressing Brazil’s reserve replacement challenge.

Authors: 

Daniel Leppert

Research Director for Latin America
daniel.leppert@rystadenergy.com

Flavio Menten

Analyst, E&P Research
flavio.menten@rystadenergy.com

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