BG Says Fewer Brazil Wells Needed to Reach Plateau Output

BG Group Plc (BG/), which plans to invest $30 billion in Brazil in the next decade, said it needs fewer wells than first estimated to reach plateau production at fields off the South American country.

Appraisal drilling and initial production show wells will flow for longer at higher rates and cost less per barrel than expected, said BG Chief Executive Officer Frank Chapman. The company made its first update on the Brazilian projects today after doubling its estimate in June, when it said reserves and resources in the Santos Basin would be about 6 billion barrels of oil equivalent net to the company.

“We expect all of this resource to be recovered using the same surface facilities we’ve envisaged in our field development plans,” Chapman told reporters on a conference call. “We now expect an earlier ramp-up to plateau production from fewer wells.”

The shares rose 3.2 percent to 1,470 pence at 10 a.m. in London, the best performer on the 15-member FTSE 350 Oil & Gas Producers Index. They climbed as much as 3.8 percent in morning trading, the most since June 30.

BG with partners Petroleo Brasileiro SA (PETR4), Galp Energia SGPS SA (GALP) and Repsol YPF SA (REP) are developing the fields off Brazil and plan to use as many as 13 floating, production, storage and offloading vessels, or FPSOs, to pump oil and gas. The Lula, Guara, Cernambi, Iara and Carioca fields account for 95 percent of BG’s total reserves and resources in the Santos Basin, the company said today in a statement.
20 Percent ‘Feasible’

The partners plan to increase FPSO capacity to allow higher extraction rates at “higher aggregate plateau production,” Chapman said. “You can de-bottleneck all those facilities, which is a common goal for all offshore facilities, and numbers up to 20 percent could be feasible, but I am not giving this as a target,” he said.

To date, BG exported about 1 million barrels of oil net to the company from the Lula field, formerly known as Tupi, the largest oil discovery in the Americas in more than 30 years.

To transport oil from the Brazilian fields BG took delivery of the Windsor Knutsen oil tanker, which was converted from a conventional Suezmax vessel into the world’s largest shuttle tanker, with the 1.1 million barrels capacity, BG said.

In June, BG agreed with Teekay Offshore Partners LP (TOO) to charter four more Suezmax-size shuttle tankers with expected deliveries between 2013 and 2014. Samsung Heavy Industries Co. will build the vessels in Korea.