Karoon goes Brazilian

KAROON Gas Australia has successfully bid on five contiguous offshore exploration blocks in Brazil’s Santos Basin, where the 8 billion barrel Tupi oil discovery was recently made.
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The company seems to have its eye on South American assets. Recently, Peruvian media reported that Karoon was negotiating an exploration and production contract for hydrocarbons in Peru’s Marañón Basin with Perupetro. The report said the contract was expected to be signed early next year.

Yesterday, Karoon, which is better known for its LNG-focused Browse Basin partnership with ConocoPhillips, was in a trading halt.

Karoon announced this morning that its new acreage acquisition was in a part of the Santos Basin south of Sao Paulo and about 300km east-southeast of the giant Tupi find.

Before the bidding took place, the Brazilian Government removed 41 blocks from the auction in response to news that the state-run oil company, Petroleo Brasileiro (Petrobras), had made a major oil discovery in the region.

The Tupi field has been estimated to contain up to 8 billion barrels equivalent of oil and gas – raising expectations that Petrobras may have discovered a 200km-by-800km oil province in the Atlantic Ocean.

As well as being relatvely close to Tupi, Karoon’s blocks are about 100km from the large Caravela and Coral oil and gas producing fields.

“Karoon believes the blocks offer good exploration potential in the hundreds of millions of barrels of oil and trillions of cubic feet of gas range,” the company said.

Karoon will be officially awarded the acreage at a ceremony in Brazil in March, when it must pay $US25 million in non-refundable signature bonuses and refundable bid bonds to the country’s National Agency of Petroleum.

The work program involves extensive geological analysis work, along with the purchase, reprocessing and interpretation of existing seismic.

On three of the blocks, Karoon is required to acquire a further 170-square-kilometres of 3D seismic in the first three-year term.

In the optional second two-year term, it has committed to drill one well in each block.

“All expenditure will be funded either through the use of Karoon funds or possibly the equity restructuring or farm-out of the permits over the coming year,” it said.

According to Bloomberg, the Brazilian bidding round attracted 2.11 billion reals ($A1.3 billion) in cash payments from the successful companies that won 117 exploration areas.

The biggest winner was OGX Petroleo e Gas Participacoes SA, a new oil company founded by Rio de Janeiro billionaire Eike Batista, which took up 21 blocks, mostly on its own or also in consortiums. The second biggest block winner was Malaysia’s Petronas, according to Reuters.

No major foreign oil companies participated in the auction, although ExxonMobil, Royal Dutch Shell and Chevron had applied to bid.

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