Case Study V4 - Britcham · This presentation does not constitute tax, legal or other advicefrom...

VIII Britcham International Seminar

Mauro Andrade – [email protected]

Petroleum Services, November 2008

Potential Impacts for the Brazilian Economy:

Case study .

2 ©2008 Deloitte. All rights reserved1-Dec-08

Sub-Salt ClusterContext

PBRAS(60%); BG(20%); REPSOL(20%)BM-S-50

PBRAS(80%); GALP(20%)BM-S-21

PBRAS(100%)BM-S-17

PBRAS(65%); BG(25%); GALP(10%)BM-S-11

PBRAS(45%); BG(30%); REPSOL(25%)BM-S-9

PBRAS(66%); SHELL(20%); GALP(14%)BM-S-8

PBRAS(65%); BG(25%); PARTEX(10%)BM-S-10

PBRAS(60%); BG(40%)BM-S-52

PBRAS(80%); GALP(20%)BM-S-24

EXXON(40%); HESS(40%); PBRAS(20%)BM-S-22

Concessionaires (Working Interest %)Block • Petrobras on all blocks

– Exxon and Shell with WI in one block

– Chevron, BP,ConocoPhillips, Devon with sub-salt experiences are not a member of the club in this Brazilian play

• Independents with significant stake

– How deep are their pockets?

• Development risks still to be fully defined

– Uncertainties on engineering solutions

– Flow rates/Number of wells

– Logistics

– Monetize gas reserves

– Others…

Source: Petroview®


Source: Deloitte Petroleum Services

2000 2002 2003 2004/2005

7,000

11,000

9,000

DJIA

IIEnron/

Worldcom

IIISarbanes-Oxley

Magnitude US$ billions

IInternetBubble

2006/2007 2008 2009

7,000

11,000

9,000

DJIA

Magnitude US$ trillions

14,000

What’s next?VSub Prime

IVPost-SOX

Financial MarketsContext


# of companies with interest in Sub-Salt Blocks in Selected Regions

Sub Salt Blocks Participants in Selected Areas

33

20

8

0

5

10

15

20

25

30

35

40

GOM West Africa Brazil



GoM Companies - @ Dec31st, 2007 (USD billion)

Sub Salt BlocksMarket Value: companies with interests in GoM

0

100

200

300

400

500

600

EXXON

MO

BIL

SHELL

PETRO

BR

AS B

P E&

P TO

TAL

BHP P

ET D

EEP

CHEVR

ON

ENI

CO

NO

CO

PHIL

STA

TOIL

MA

RATH

ON

D

EVON

APAC

HE C

OR

P

HESS C

OR

P

ANA

DAR

KO

W&

T O

FF

NEXEN P

OFF

MU

RPHY U

SA

NIP

PON

O U

SA

NO

BLE

EN

ERG

Y ER

TM

ARIN

ER

MA

GN

UM

ATP

O&G

CO

RP

PYRAM

IDM

ARU

BENI

FOUR

STAR

SO

JITZ

ENERG

Y PA

RT

MER

IT M

NG I

MC

X GO

M

MC

OFF

CV E

NERG

Y



West Africa Companies - @ Dec31st, 2007 (USD billion)

Sub Salt BlocksMarket Value: companies with interests in West Africa

0

100

200

300

400

500

600

700

800

CH

INA

NA

T P

ET C

OR

P

EXX

ON

MO

BIL

CO

RP

SIN

OP

EC

CO

RP

PETR

ON

AS

BP

TO

TA

LC

HEV

RO

N

EN

I

AL T

HA

NI E

MIR

ATE

S

STA

TO

ILH

YD

RO

ASA

GA

Z D

E F

RA

NC

E

MA

RA

TH

ON

OIL

CO

RP

DO

MIN

ION

PETR

OLE

UM

GA

LP E

NE

RG

IATU

LLO

W O

IL P

LC

SU

DA

PET

SO

NA

NG

OL

PETR

OD

AR

RO

C O

IL

DA

NA

PE

TRO

LE

UM



Companies in Brazil - @ Dec31st, 2007 (USD billion)

Sub Salt BlocksMarket Value: companies with interests in Brazil

0

100

200

300

400

500

600

700

800

EXXO

N MO

BIL

SH

ELL

PETRO

BR

AS

BG

GR

OUP

REP

SO

L-YP

F

HES

S C

OR

P

GA

LP

PAR

TEX



So Far, So Good...So What?Funding the Oil Bonanza

• Finance investment needs can be an issue…

– Pace of developments (phased, modular, ??)

• Petrobras has USD 13 billion per year until 2012 to put the existing projects on stream

• Per our estimates a hyphotetical field in ultra-deep water with 5 bi boe of reserves wouldrequire US$ 50 billion capex

• Joint financial effort from all players

– Oil companies

– Suppliers

– Service Providers


Production Curve

• Production from 2011 to 2040• Peak Production of 1,1 MM boe/day in 2016• Reserves 5,1 Billion BOE• Average Decline Rate 7%

Technical Assumptions...

-

50.000

100.000

150.000

200.000

250.000

300.000

350.000

2010 2014 2019 2024 2029 2034 2039

in b

pd

-

200.000

400.000

600.000

800.000

1.000.000

1.200.000

Total Mod1 Mod2 Mod3 Mod4 Mod5 Mod6 Mod7 Mod8


Cost Assumptions…

Eight FPSO’s modules

FPSOs of 1,600 USDMM each

• 25 Wells per FPSO:21 producing 4 injection68 drilling days/well: 490 k USD/dayFlow rate/well: 8,500 bbl/d

• Pipeline 220 km off coast

• Capex USD 10 boe

• Opex USD 6 boe2,400.00

FEED/Engineering Serv.

Capex in thousand USDMajor Cost Groups

48,807.00Total Capex

12,800.00FPSO

9,600.00Pipes/Logistics/Other Services

6,760.00Riser/Flowlines/Install.

2,920.00Subsea Wells

14,327.00Drilling


Economical Assumptions…

• Oil - 55 USD/Bbl

• Nominal analysis

• 10% discount rate

• Valuation Jan/2008

Costs profile

-

2.000

4.000

6.000

8.000

10.000

12.000

14.000

2008 2013 2018 2023 2028 2033 2038

Costs

(in

US

DM

M)

Other Capex Opex


Case Study 1: Company leasing the FPSOs

Petroscope®

Economic Indicators & Cashflow Chart

Pre-Tax Post-Tax

NPV at 10% on 1 January 2008 (USDmm) 29.766,05 7.933,88

Internal Rate of Return 48,0% 18,2%PVI at 10% on 1 January 2008 2,5 1,4

Maximum Cash Exposure (USDmm) 24.142,04

Project Payback 2018,0 (7 years)

Discounted Project Payback at 10% 2019,0 (8 years)

-10000,0

-5000,0

0,0

5000,0

10000,0

15000,0

2008 2015 2022 2029 2036

US

Dm

m

-30000

-20000

-10000

0

10000

20000

30000

40000

50000

60000

US

Dm

m

Net Cashflow Cumulative Net Cashflow


Case Study 2: Company acquiring the FPSOs

Petroscope®

Economic Indicators & Cashflow Chart

Pre-Tax Post-Tax

NPV at 10% on 1 January 2008 (USDmm) 33.430,35 5.950,92

Internal Rate of Return 40,8% 14,1%PVI at 10% on 1 January 2008 2,1 1,2

Maximum Cash Exposure (USDmm) 39.043,65

Project Payback 2019,0 (8 years)

Discounted Project Payback at 10% 2021,0 (10 years)

-20000,0

-15000,0

-10000,0

-5000,0

0,0

5000,0

10000,0

15000,0

2008 2015 2022 2029 2036

US

Dm

m

-60000

-40000

-20000

0

20000

40000

60000

80000

US

Dm

m

Net Cashflow Cumulative Net Cashflow


Discounted Per barrel analysis (@ 10%)

Petroscope®

Case 1 (lease & tax optimization) Case2 (acquisition)

11%

32%

19%

31%

7%

PV Opex PV Capex

PV Government Take PV Taxation

PV Net Cashflow

USD/boe

PV Gross Revenue 16,23

PV Opex 1,73

PV Capex 5,32

PV Government Take 3,07

PV Taxation 5,01

PV Net Cashflow 1,09

23%

23%20%

25%

9%

PV Opex PV Capex

PV Government Take PV Taxation

PV Net Cashflow

USD/boe

PV Gross Revenue 16,23

PV Opex 3,79

PV Capex 3,73

PV Government Take 3,28

PV Taxation 3,98

PV Net Cashflow 1,45


Sensitivity Analysis on Case 1

Petroscope®

NPV at 10% on 1 Jan 2008 (Nominal USDmm)

Base Case 7.933,88

Variable 80,00% 90,00% 100,00% 110,00% 120,00%

Capex 2008 - 2050,5 10.995,47 9.535,46 7.933,88 6.381,61 4.850,88

Other Costs 2008 - 2050,5 8.105,65 8.019,77 7.933,88 7.848,00 7.762,12

Opex 2008 - 2050,5 10.027,86 8.980,87 7.933,88 6.941,09 5.891,38

55 Oil Price 2008 - 2050,5 807,12 4.401,36 7.933,88 11.505,39 14.895,26

Tornado Chart

Variable Low High Range

55 Oil Price 2008 - 2050,5 807,12 14.895,26 14.088,14

Capex 2008 - 2050,5 10.995,47 4.850,88 6.144,58

Opex 2008 - 2050,5 10.027,86 5.891,38 4.136,48

Other Costs 2008 - 2050,5 8.105,65 7.762,12 343,52

(297,62) 1.702,38 3.702,38 5.702,38 7.702,38 9.702,38 11.702,38 13.702,38 15.702,38

55 Oil Price 2008 - 2050,5

Capex 2008 - 2050,5

Opex 2008 - 2050,5

Other Costs 2008 - 2050,5

NPV at 10% on 1 Jan 2008 (Nominal USDmm)

Low High


Conclusions

• Under the current macroeconomic scenario finance the investments will be challenging

• Accessing cost competitive reserves is an important piece of the equation

– Would allow proper finance and the management of the risks associated with projects of such massive magnitude

• Debates over an eventual “Oil Bonanza” must ensure a fair regulatory framework

– Government wants to maximize returns from its resources, but has to ensure a fair balance

• Ensure an internationally competitive taxation system is key to attract foreign investment that will help to develop the resources

– In any given regulatory framework


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