Equinor and Exxon Reach Agreement to Expand Oil Operations in Brazil, Reports Reuters

By Sabrina Valle

HOUSTON – Equinor SA and Exxon Mobil Corp have initiated efforts to expand an $8 billion oil development off the coast of Brazil, as confirmed by the Norwegian oil producer.

The companies aim to increase future production from the Bacalhau oil field, Equinor’s largest project outside of Norway, which holds more than 1 billion barrels of oil. Plans include the consideration of a second drilling rig and floating production platform for the next phase, along with a gas pipeline extending over 100 miles, according to sources familiar with the discussions.

For Exxon, Bacalhau presents the opportunity to tap into its first oil production offshore Brazil, a key area for growth, while also allowing for a new supply of oil through lower carbon operations. Production is expected to begin in 2024 from the venture’s 220,000 barrel per day production vessel.

Exxon directed inquiries to Equinor, which operates the field. Equinor announced plans to drill a new appraisal well in the northern region of the Bacalhau field next year to gain a clearer understanding of the reserves for the second phase of development.

The partners are currently assessing a contract for a second drilling rig, with pre-drilling of phase one wells anticipated to start in the third quarter of this year. Equinor has not provided comments regarding the new floating platform or gas pipeline.

The spokesperson highlighted that Bacalhau is a globally competitive project with a break-even cost below $35 in a crucial energy region. If successful, the second phase of development could effectively double the project’s initial investment, as per two sources close to the matter.

A key decision remains whether the field can generate sufficient oil to warrant a second floating platform and a gas pipeline to transport the oil to shore. If the findings do not support the need for a second platform, a subsea tieback may be utilized. This would involve connecting wells to the first floating platform, which would reinject gas into the reservoir.

The first floating production storage and offloading unit (FPSO) is being constructed by Japan’s Modec Inc and is designed to achieve greenhouse gas emissions intensity that is 65% lower than Exxon’s average, according to company insights.

The partners entered into a $380 million, four-year contract with Seadrill Ltd for the phase one drilling campaign last year.

Bacalhau is notable for being Brazil’s first pre-salt field not developed by the state-controlled Petroleo Brasileiro SA, which discovered the field in 2012 and sold it to alleviate debt. Equinor and Exxon each hold a 40% stake in the project, while Petrogal Brasil owns the remaining 20%.

Seadrill’s West Saturn rig is set to drill the first six out of 19 approved wells at Bacalhau. Notably, this is the same rig previously used by Exxon in its offshore blocks in Brazil, which yielded no exploration success.