Infrastructure Sharing: Creating Value for Brazilian Deepwater Offshore Assets
Authors: Pedroso Daniel Cleverson , Abdala Demetrius Casteloes , Pinto Luiz Andre Goncalves 
Published: April 2012

Many analysts forecast the offshore industry as one of the main sources ofnew oil. The deepwater and ultra deepwater operational environments arenormally mentioned as " frontier" areas. However, the history of the E&Pdeepwater activity has now more than 25 years in the GOM, North Sea and Brazil- so, the label " frontier" for those areas is out of date. As such areas becomemature and smaller fields are discovered the industry is challenged toeconomically exploit those resources.

The investments in infrastructure for deepwater production require asignificant scale for achieving minimum economic returns. The infrastructure isnormally planned to attend the peak production and many of the assets may notbe recovered or re-used. Therefore a significant spare capacity may arise insuch assets, that may then be converted in " hub" production systems - a growingnumber of satellite fields are developed using existing infrastructure in theNorth Sea and GOM, and its is expected that this will occur frequently also inBrazil.

The utilization of spare capacity by other fields is a typical process in whichboth parties, the producer and the receiving facility, will benefit: theproducer will not be required to spend the whole CAPEX that would be requiredto a new infrastructure and can anticipate the production curve; the receivingfacility will earn extra revenues and perhaps will extend the economical lifeof its own fields that are using the same infrastructure.

Given the number and complexity of contractual, legal, tax and technical issuesinvolved, the signature of a production handling and other agreements requiresinvolvement of multidisciplinary teams. Implementing the necessary agreementsquickly and efficiently is a key factor for achieving the benefits of sharingthe infrastructure.

This paper illustrates the economical benefits that a producer may obtain bysharing existing infrastructure, considering the concession regime applied todeepwater fields in Campos Basin, Brazil. It is demonstrated that the reservethreshold for economic feasibility is significantly reduced. The main legal, accounting and tax issues that exist due to the particularities of theBrazilian regulatory framework are also discussed.

Introduction

The development of deepwater offshore production is characterized by thehigh CAPEX, significant economy of scale and in many cases the completetechnical unfeasibility of re-utilization of the materials and equipment..

Harpin (2011) pointed out that between 2000 and 2010 forty (40) small fields(&lt; 10 MM boe) were developed in the UK continental shelf - from these 40fields only one did not made use of existing infrastructure. The explorationmay also be positively affected. Harpin also showed that in the UK North Seathe exploration targeting small structures is centered in areas where access toinfrastructure is plentiful. Other authors as Willigers et.al. (2010) andCromptom & Gilman (2010) recently pointed out the importance of the anchorfields serving as hubs to the future of the offshore oil industry. This effectis enhanced as the basins become mature and the exploration effort is focusedin smaller accumulations, that were eventually first neglected due to theperspective of discovery of huge volumes or because these smaller volumes wereconsidered not economical at the time.

Production infrastructure, when located in deepwater, is normally initiallyinstalled for exclusive use of a specific field that justifies a stand-alonedevelopment approach. Processing, compressing and export capacities shall thenbe designed to attend peak production. Therefore some spare capacity willappear at some point, which may be constrained by the amount of water that ishandled in the unit.