Russian state oil group NK Rosneft’ AOA signed an agreement with Brazil’s state-run Petroleo Brasileiro SA to seek ways to sell natural gas trapped in Brazil’s remote Amazon jungle, the companies said on Monday. The companies did not immediately give details of the deal, except to say it is “a protocol of intentions.”
Rosneft owns 51 percent of HRT O&G, a Brazilian company that owns three giant oil and gas exploration blocks in the Solimoes Basin, west of Manaus, a city of about 1.8 million that is the capital of Amazonas state. They contain an estimated 542 million barrels contingent oil and equivalent natural gas (BOE) resources, 83 percent of it gas, according to HRT Participacoes em Petroleo, a Rio de Janeiro-based company that is Rosneft’s 49 percent partner in the Solimoes blocks.
Contingent resources are oil and gas that have been discovered but lack some factor that would make it commercial to produce. At current estimates, the resources are equivalent to the amount of oil the United States uses in about a month. The Rosneft-Petrobras agreement was signed during a state visit by Russian President Vladimir Putin to Brazil. The two countries also announced military, commercial and space-cooperation agreements.
HRT and Petrobras signed a memorandum of understanding to study Amazon gas sale options two years ago, when Rosneft held a minority stake in HRT through TNK-BP, its former joint venture with BP Plc . Despite that agreement and various studies, no solution was found.
Exploiting Amazon gas is difficult because of the distance from major population centers and complications in building pipelines in the jungle. The gas is separated from Manaus, the nearest city, by as much as 900 kilometers of impassible jungle. The nearest pipeline, owned by Petrobras, was built for its own oil and gas output in the region. To build the pipeline in the jungle, Petrobras had to adapt offshore pipe-laying techniques.
“We have different options … We need to sell the gas, and Petrobras has a gas transportation system which one could get access to, and we are going to discuss those issues,” Rosneft Chief Executive Officer Igor Sechin told reporters on the sidelines during one of Putin’s stops in Brazil.
Before Rosneft agreed to exercise an option to buy control of HRT last year, HRT was considering several projects for moving the gas to market. They included liquefied natural gas, gas to liquids technology that converts natural gas into gasoline and other fuels, electricity generation and industrial uses such as energy or heat for fertilizer or aluminum production.