Equinor, Exxon Expand Brazil Oil Operations, Discuss Building 100-Mile Gas Pipeline

(Reuters) — Equinor SA and Exxon Mobil Corp. have taken the first steps to expand an $8 billion oil development off Brazil's coast, the Norwegian oil producer told Reuters.

The firms want to boost future production from the Bacalhau oil field, Equinor's largest project outside of Norway with more than 1 billion barrels of oil, the company said.

A second drilling rig and a second floating production platform are being considered for the next phase along with a more than 100-mile-long gas pipeline, three people close to the discussions said.

For Exxon, Bacalhau could provide its first barrel of oil from offshore Brazil, one of its top growth prospects, and a new supply of oil from lower carbon operations. First oil is due in 2024 from the venture's 220,000 barrel per day production vessel.

Exxon referred questions to Equinor, which operates 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 reserves base for the Phase 2 development."

The partners are assessing awarding a contract for a second drilling rig. Pre-drilling of phase 1 wells should start in the third quarter this year, a spokesperson said. Equinor did not comment on plans for a new FPSO or pipeline.

Investment May Double

"Bacalhau is a globally competitive project with a break even below $35 in a key energy region," the spokesperson said in response to Reuters questions.

The second phase could potentially double the project investment if the new exploration works are successful, two people close to discussions said.

One of the issues to be decided is whether the field will 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 of the people said.

Equinor and Exxon could use a subsea tieback if the findings do not justify a second platform, two of the people said. Wells would be connected to the first FPSO, which would reinject the gas into the reservoir.

The first FPSO is being built by Japan's Modec Inc and was designed to keep greenhouse gas emissions intensity 65% below Exxon's average, according to a company presentation.

Drilling To Commence

The partners last year signed a $380 million, four-year contract with Seadrill Ltd. for the phase 1 campaign.

Bacalhau is Brazil's first pre-salt field not to be developed by state-controlled Petroleo Brasileiro SA, which made the discovery in 2012 and sold it to pay down debt. Equinor holds a 40% stake, as does Exxon. Petrogal Brasil owns a 20% share.

Seadrill's West Saturn rig will drill Bacalhau's first six of 19 approved wells, according to Equinor. It is the same rig that Exxon has used in offshore blocks it operates in Brazil, with no exploration success.

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