It’s natural to think of super basins as highly developed, mature play areas. When a basin has already produced more than 5 billion barrels of oil equivalent, there’s an established history of exploration and production.
The Santos Basin, especially the basin’s pre-salt play offshore Brazil, is one of the more notable exceptions to that idea.
This super basin area is almost all about the future.
“There is so much running room, so much remaining potential. We’re going to see new reservoirs developed, new plays developed,” said James Deckelman, vice president of investment and program assurance for ION Geophysical in Houston.
This area’s significant exploration and production potential comes largely from pre-salt lower Cretaceous carbonate reservoirs in the Santos and neighboring Campos Basin, according to Deckelman.
Exploration and Geological History
Exploration in the area dates back to the 1970s and was mostly unsuccessful, at first. The major breakthrough started with the 2006 offshore Tupi discovery in the Santos, opening the giant Lula oil field, and first production from pre-salt carbonates in the Campos Basin Jubarte field in 2008.
Tupi/Lula was considered the Western Hemisphere’s biggest discovery in 30 years and last year produced more than 1 million barrels per day.
“There are two principal components (to the pre-salt play). One is technical, the other commercial. In both respects, the play is proven.” Deckelman said.
“The play is repeatable and extensive, and all elements of the petroleum system – source, reservoir, seal, trap – are becoming increasingly well understood,” he noted.
Santos Basin’s geological history is generally well described. It’s one of the famous sequences of rift basins formed by Gondwanan separation, stretching along the east side of present-day South America and the west side of present-day Africa.
Thick salt deposits in the basin – more than 2,000 meters thick in places – and salt movement in the subsurface through halokinesis challenged seismic imaging and interpretation for years. Resolving pre-salt reflectors proved key to successful exploration, Deckelman said.
Today, Santos Basin “fluid contacts and reservoir facies are well-defined seismically,” he noted.
For many reasons, industry analysts don’t just talk about the potential of the Santos Basin pre-salt. They’re just as likely to sing its praises. Deckelman described the basin as having high permeability and high porosity with slightly over-pressured, undersaturated reservoirs.
“Oil column heights are remarkable, in some places over 600 meters,” he said.
Initial production rates from new wells in the Santos pre-salt have typically been impressive, as much as 50,000 barrels per day, he said. Accordingly, “the NPV (net present value) of each well can be very high,” he observed.
In analyzing the basin’s production potential “it’s relatively easy to use a few screening criteria to prioritize areas of exploration interest,” Deckelman noted.
“Data is widely accessible in Brazil. And the government has been generally accommodating to IOC investors,” he added.
The early Cretaceous lacustrine black shales and carbonates of the Guaratiba formation provided the main source rocks for the Santos Basin’s pre-salt play. Offshore Brazil also has a less productive post-salt play in the basin, primarily sourced by marine shales.
The pre-salt play is endowed with “one of the most prolific source rocks in the world, full stop – the basin is on an incredible trajectory that I don’t see changing anytime soon,” Deckelman said.
Holding a currently estimated 16.4 billion barrels of 2P reserves, the play extends more than 750 kilometers and “continues northward well into the Campos Basin and possibly beyond,” he added.
The giant Libra oil field, discovered in 2010, became the largest pre-salt accumulation found in the Santos Basin to date. Still under evaluation, Libra is estimated to hold 8 billion to 12 billion barrels of recoverable reserves, according to Brazil’s National Agency of Petroleum, Natural Gas, and Biofuels.
Over the years, development in the deepwater Santos pre-salt presented numerous technical and operational challenges. National oil company Petróleo Brasileiro SA, or Petrobras, has received considerable recognition for its work in the area.
Earlier this year, the Offshore Technology Conference announced that Petrobras won the 2020 OTC Distinguished Achievement Award for Companies in recognition of its innovations at the deepwater Búzios field in the Santos pre-salt.
“I’m very impressed with industry’s continual operational improvement. Much of this we owe to Petrobras. They’ve climbed the learning curve quite quickly,” Deckelman explained.
“Lifting costs, for example, have been reduced from about $14 per barrel to about $7 per barrel. Drilling and completion times have been reduced from about 300 days to about 100 days,” he said.
While exploration acreage is available in the Santos Basin -- through bid rounds, Petrobras divestment, Brazil’s permanent offer blocks and other opportunities – buy-in costs can be a sticking point for operators eyeing offshore Brazil.
There’s no doubt about the attractiveness of potential reserves and production.
“The scope of the opportunity is such that companies can establish legacy positions and integrate with their other businesses across the value-chain,” Deckelman said.
However, “commercially, one of the challenges is seller expectations regarding block value. They are very, very high,” he noted.
The COVID-19 pandemic put a temporary halt to offshore Brazil bid-block availability earlier this year. On April 1, ANP announced suspension of its 17th round of auction bids for exploration and production rights planned for 2020, due to the health crisis
The earlier Round 16 auction held in November 2019 brought $2.2 billion in signing bonuses for 12 blocks, including $1 billion for a single block area, C-M-541 in the Campos Basin.
Operators also must cope with a complicated set of government regulations in the Brazilian offshore, including oil-sharing requirements as well as arrangements that give Petrobras operating rights and other privileges in certain areas.
“It isn’t a level playing field, by any means. It is well understood that Petrobras has certain preferential rights,” Deckelman said.
Put succinctly, there’s a home-field advantage in the Santos Basin, and IOCs don’t have it.
Production from Brazil’s offshore oil fields has climbed steadily but was recently slowed by the pandemic. In March this year, Petrobras announced it was cutting production to 2.07 million b/d in light of declining world demand for oil.
However, the company reversed itself just a month later, saying it would move production to 2.26 million barrels per day, citing better-than-expected fuel demand. Production from the pre-salt has been the fastest growing component of Brazilian oil output for a decade.
“The government is looking to double the pre-salt production in (the next) 10 years, a goal that is very achievable,” Deckelman said.
Some of the excitement around the Santos Basin area comes from the potential of its neighboring offshore basins, the Campos and Espirito Santo basins to the northeast and the Pelotas Basin to the southwest.
Together, those basins could have the potential to become a Gulf of Mexico-type play area with decades of exploration opportunity ahead.
“The Santos basin is well established already and has multi-billion-barrel remaining recoverable oil potential via primary recovery, in addition to that recoverable via secondary means and through technological advances,” Deckelman noted.
“Great basins always get greater through time,” he said. “I see that happening to the Santos Basin, as well.”