Brazil's oil regulator said it may tell entrepreneur Eike Batista's oil company OGX, already struggling under a mountain of debt, to invest in drilling more wells at offshore fields that the firm has dismissed as uncommercial. OGX, once Brazil's second-largest oil company by market value and a symbol of the country's now-stalling commodities boom, has seen its shares lose 98 percent of their value since they hit a record high in 2010.
OGX surprised investors last week when it said a reassessment of geological surveys of Tubarão Azul showed there was no existing technology that could economically extract the oil. "We can agree with them (that the field is no longer commercially viable) or we can ask them to drill more wells," Magda Chambriard, director-general of the regulator ANP, told Reuters in an interview on Tuesday. "If it is concluded that it's not commercial, we can get back the concession," she added.
Tubarão Azul was OGX's first offshore field and output began in early 2012 at a level far below expectations. The company has now said production could end as soon as next year. Chambriard, in London to drum up investor interest for a bidding round of offshore oil blocks in October, said the ANP was still evaluating OGX's development plan for the field and a conclusion would be reached in the coming months.
Chambriard said Chevron's Frade field, closed last year after two high-profile oil leaks, would not return to full production until a study of what happened during the second incident has been received and analysed by the ANP. The field has resumed production at 20,000 barrels per day on the condition that water or gas injection to increase production volumes is not used. Frade was producing about 60,000 barrels a day at the time of the closure.
"The second incident is not yet completely analysed, so until we have these results we cannot allow them to inject water or drill deeper wells," Chambriard said. According to Chambriard, the field should reach its former production level once injection is allowed. When this will happen depends on Chevron completing the studies. "It depends now more on them than us," she said. "As soon as they complete the studies, they can start injecting." Chevron is the field's operator and owns 52 percent of the field's output. The other partners are Petrobras and Frade Japão, a joint venture between Japanese trading houses Sojitz Corp and Inpex Corp. The two leaks resulted in environmental lawsuits which at one point totalled $20 billion, but when asked if there had been any lasting environmental damage Chambriard replied "no."
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