HOUSTON (Reuters) – Norway’s Equinor Oil and Exxon Mobil Corp. have taken the first steps to expand an $8 billion oil project off the Brazilian coast, told Reuters.
The company said the companies want to increase future production from the Bacalhau oil field, Equinor’s largest project outside Norway with more than 1 billion barrels of oil.
Three people close to the discussions said a second drilling rig and a second floating production platform were being considered for the next phase along with a gas pipeline of more than 100 miles.
For Exxon, Bacalhau could provide its first barrel of oil outside of Brazil, one of its biggest growth prospects, and new supplies of oil from low-carbon operations. The first oil is due in 2024 from the project’s production vessel of 220,000 barrels per day.
Exxon referred questions to Equinor, which is in the field. Equinor told Reuters it plans to drill a new appraisal well in the north of the Bacalhau field next year “to better understand the reserve base for Phase II development.”
Partners are evaluating the award of a contract for a second rig. An official spokesman said that the pre-drilling of wells for the first stage is scheduled to begin in the third quarter of this year. Equinor has not commented on plans for a new FPSO or pipeline.
Investment may double
“Bacalhau is a global competitive project with a break even below $35 in a key energy area,” the spokesman said in response to questions to Reuters.
Two people close to the discussions said the second phase could double the project’s investment if the new exploration work was successful.
Two people said one of the issues to be decided would be whether the field would produce enough oil to justify a second floating platform, or FPSO, and a gas pipeline to bring the field’s natural gas to shore.
Two people said Equinor and Exxon could use an undersea tieback if the results did not justify a second platform. The wells will be connected to the first FPSO, which will return gas to the tank.
The first FPSO was built by Japan’s Modec and designed to keep greenhouse gas emissions intensity 65% below Exxon’s average, according to a company presentation.
Digging to start
Last year the partners signed a $380 million four-year contract with Seadrill Ltd for the first phase campaign.
Bacalhau is Brazil’s first undeveloped salt field by state-controlled Petroleo Brasileiro SA, which made the discovery in 2012 and sold it to pay off debt. Equinor holds a 40% stake, as does Exxon. Petrogal Brasil owns 20% of the shares.
According to Equinor, Seadrill’s West Saturn rig will drill the first six of 19 approved wells in Bacalhau. It’s the same rig Exxon has used in the offshore blocks it operates in Brazil, without exploration success. (Reporting by Sabrina Valley; Editing by Sam Holmes)