International Trade and Investment Law

Shale gas: opportunities and challenges

May 26, 2013 − by Renata − in Blog − No Comments

The successful US experience in the production of shale gas and its positive impact on the competitiveness of American manufacturing have motivated Brazil to pursue the development of shale gas exploration and production by fracking.

Brazil holds the tenth largest shale gas reserves in the world. Unlike its reserves of natural gas, which are predominantly located offshore, Brazil’s shale gas deposits are concentrated in five areas in the country’s interior, more specifically in the Parecis, Parnaíba, Recôncavo, Paraná and São Francisco river basins. The only wells currently in operation are located in the Recôncavo basin in the State of Bahia. Next October the Brazilian government will auction off concessions for the production of shale gas in the other areas.

A recent study conducted by the Brazilian National Economic Development Bank has identified the opportunities and challenges associated with developing shale gas production in Brazil. Some of the study’s conclusions may be of interest to Canadian and American companies in the oil and gas industry seeking to get a foothold or expand their presence in the Brazilian market. What follows is a short summary of the study’s main findings:

1) Offloading, processing and transportation infrastructure

As natural gas exploration and production in Brazil are predominantly offshore, the network of pipelines and refineries is located along the coast and concentrated in the Southeast of Brazil, close to the main consumer market. To the exception of the Recôncavo basin, the areas where shale gas is found are far from existing pipelines and refineries; they lack offloading, processing and transportation infrastructure. In order for shale gas production to be viable, Brazil will need to invest in the construction of the required infrastructure.

2) Fracking equipment and technologies

Brazil has a domestic oil and gas equipment industry that specializes in offshore exploration and production. The possibility of synergies with the exploration and production of shale gas has not been assessed yet. At some stage Brazil will probably have to import some of the equipment and the technologies used in the fracking process.

3) Geological aspects

Brazil’s shale gas is found in sedimentary basins; studies on the seismic consequences of fracking in sedimentary basins are scarce; as a consequence, there is a need for investing in research and development (R&D) of exploration and production technologies adapted to Brazil’s geological conditions.

Source: Elisa Salomão Lage et al. “Gás não convencional: experiência americana e perspectivas para o mercado brasileiro” BNDES Setorial 37, 03/2013, 33-88.

Post a Comment

Your email address will not be published.