Chinese energy giants win .8 bln bids in Brazil to explore offshore oil

Updated 2017-11-03 10:33:57 Global Times

Projects will provide deep-sea drilling experience

Three Chinese oil giants won bids for six pre-salt oil reserves in Brazil, a step in developing their deep-sea oil drilling technologies, Chinese experts said.

Six of eight pre-salt oil blocks were offered in two auctions, generating in total .15 billion reais (.88 billion) in bids, and multinational oil and gas producers such as Royal Dutch Shell, Statoil and BP participated in the auction, according to a post on the website of the National Agency of Petroleum of Brazil on Tuesday.

China Petroleum & Chemical Corp (Sinopec), China National Oil and Gas Exploration and Development Corp (CNODC) and China National Offshore Oil Corp (CNOOC) won three blocks as part of a consortium, according to the post.

Brazil, along with West Africa, the Gulf of Mexico and the North Sea near Norway, have become major target regions for deep-sea oil drilling and exploration. The abundant pre-salt oil reserves in the South American country have attracted global attention, Zeng Xingqiu, an industry veteran and chief geologist of Sinochem Group, told the Global Times on Thursday.

"China and Brazil have a very good relationship in energy cooperation, and Chinese oil producers aim to further develop their deep-sea drilling technologies," he said, noting that new projects undertaken in cooperation with foreign oil producers will enable Chinese energy companies to gain experience in deepwater and ultra-deepwater drilling.

Pre-salt oil reserves are in deep-sea areas and under thick layers of salt.

China is among Brazil's largest trade partners, according to the Brazilian government's website. Crude oil is one of the top exports on the Brazilian side.

In September, total bilateral trade was .2 billion, at least 30 percent of overall trade in year-to-date terms, the website showed.

Zeng, who also advised the Chinese bidders for the pre-salt blocks, said Brazil needs foreign capital to explore its oil reserves, considering the country's sluggish economic growth.

"Deep-sea drilling and exploration costs are generally three to five times higher than conventional drilling, and Chinese companies have a reputation for abundant financial resources," he said.

When it comes to conventional oil drilling, Chinese producers are just as competitive as their foreign rivals, Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times on Thursday. "Also, we have an edge in labor costs," he said.

With production slowing in the Campos Basin, a traditional oil reservoir in Brazil, the discovery of new fields located in the Santos Basin offers the resources-dependent country a new tool to counter sluggish global crude oil supply, Zeng noted.

Pre-salt production corresponded to 49.8 percent of the total oil produced in Brazil, according to a post published on the Brazilian agency on Wednesday.

In September, pre-salt production in Brazil amounted nearly 1.68 million barrels of oil equivalent per day (bpd), while total oil production totaled 2.65 million bpd.

However, when it comes to deepwater drilling, Chinese companies lag far behind foreign rivals such as Exxon and Shell, Zeng noted.

"Chinese companies have drilled for oil in waters at depths of 50 to 100 meters, but it's definitely not enough," he said.

Still, Chinese oil companies have made some progress in deep-sea drilling in recent years. For instance, CNOOC unveiled an offshore drilling rig called Haiyang Shiyou 981 in 2014, the first independently designed and constructed semi-submersible drilling platform. The rig has a maximum operating depth of 3,000 meters and drilling depth of up to 12,000 meters, according to CNOOC's website.

"But we haven't seen any major breakthroughs in real-time deep-sea drilling operations," Zeng said.

Participation in oil exploration in Brazil shows that the three Chinese companies believe there are prospects for further oil supply, said Li Li, director of research at Shanghai-based research and consulting firm ICIS China.

"It will be helpful for Chinese players to further tap into the local oil market," Lin remarked.

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