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Swimming With the Sharks | OGX

Tubarão Azul | Blue Shark

Tubarão Azul | Blue Shark

Source: ISTOÉ Dinheiro.

OGX, the oil and gas company of impresario Eike Batista, has until December to present its development plans for the oil fields Tiger Shark, Cat Shark and Sand Shark — Tubarão Tigre, Tubarão Gato and Tubarão Areia —  in the Campos Basin.

The company had petitioned the National Oil, Gas and Biofuels Agency (ANP) for a five-year suspension of production and the postponement of development plans in these fields. These requests were turned down by the ANP in late September.

“With this decision, it is up to them to say what they intend to do. They have a deadline that extends to the end of this year, said ANP director Helder Queiroz. In their development plans, oil companies detail for the regulator how a field will be explored, how many platforms will be installed, how many wells will be drilled and the sum of investments in the project.

In a Material Event statement released Friday evening, OGX reports having presented a preliminary development plan to the ANP, “in order to preserve the possibility of seeking out alternatives that would make the development of these three fields economically viable.”

In the background of this request for a postponement is the statement the company released in June, saying that the three fields are not economically viable. This conclusion emerged from geological and geophysical studies of Blue Shark, which is in its production phase.

According to the study by OGX, the elevated degree of discontinuity of the Blue Shark reserves have compromised the productivity of the field. To improve production, the company will have to drill a larger number of wells than originally thought, which would make for scant profits.

With this, production at Blue Shark could shut down in 2014. Based on the data it has, the company applied the same analysis of the Tiger, Cat and Sand fields and identified the same degree of production interruptions.

The rejection of its request to the ANP regarding its development plan leaves OGX at a crossroads. Whereas OGX  had already declared the commercial value of the three fields, it runs the risk of its preliminary plan being rejected, which could mean turning the fields back over to the ANP. The three fields are part of BlockBM-C-41, snapped up by OGX in the ninth round of ANP auctions for R$ 237.4 million. In April of this year, the company had already returned to the ANP the Tambora and Tupungato accumulations, also part of BM-C-41, having decided not to proceed with exploration there.

Court-Supervised Restructuring

Queiroz commented that that agency has not yet conducted an analysis of the potential impact of a court-supervised restructuring of OGX, as the market has considered

“Because we regulate concessions, our unit of analysis is the bloc,” he said, recalling that as a concessionaire, OGX has a series of obligations to comply with. In the event it decides to pursue a court-supervised restructuring, the ANP will analyze the situation.

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