Operators in Brazil's core oil and gas sector need a competitive and stable regulatory framework for projects there to win out over developments elsewhere in the world and the rise of renewables as global fossil fuel demand wanes, according to Equinor chief executive Anders Opedal.
Speaking at the Rio Oil & Gas 2020 digital conference, Opedal said Equinor's portfolio of investment opportunities in Brazil must compete with projects in the likes of Norway, Canada and the UK.
“We are not able to develop all of the projects in our portfolio. They all compete with each other and also against renewable projects,” the newly installed chief executive said on Tuesday.
'We have to prioritise'
“We have to prioritise,” he added of the importance of a robust industry framework in which oil and gas players can execute projects.
“There is a competition between different countries around the world to put the right framework in place to enable future oil and gas projects,” Opedal said.
Future success for Equinor in the Brazilian market is, he said, in part dependent on it taking final investment decisions on the 2 billion barrels of oil equivalent Bacalhau field and the 1 billion boe BM-C-33 block, home to the Pao de Acucar pre-salt discovery.
“We need to produce those barrels with as low emissions as possible and it is also necessary to build a gas value chain in Brazil for the BM-C-33 project,” Opedal said.
Lessons from Peregrino
Equinor's first operated oilfield in Brazil was the Peregrino field, which it took in 2001. Opedal said that, although some thought the field would never produce, it has now produced some 200 million barrels.
“We used learnings from the Norwegian Oseberg field to develop the drainage strategy for Peregrino,” he said.
“With this organisation [at Peregrino], we were able to take the next step to build on the portfolio with Bacalhau and BM-C-33,” he said.
Opedal also stressed the importance of Brazil's recent opening up of the gas sector in the country.
“It is opening up possibilities, particularly for a field like BM-C-33 where we have condensate and gas, and we have a concept we really like where we bring the gas to shore,” he said, adding that the development of a robust gas market will create many jobs.
“It is about making sure that there is an open market where we can sell the gas on competitive terms. That will enable a final investment decision for BM-C-33," Opedal said.
The Equinor boss — who only took over from previous chief executive Eldar Saetre in early November — was challenged by the conference moderator, IBP adviser Jorge Camargo, about the company’s effort to adjust its business to a low-carbon society.
“We fully acknowledge the Paris agreement on climate change and it is embedded in our strategy. We also see that we actually can make a difference,” Opedal said.
He explained that the company has over many years developed a competence within oil and gas, with a focus on not only producing fossil fuels, but with as low carbon emissions as possible.
“We have electrified some of our platforms and we are currently building [wind turbines] to deliver electricity to five platforms on the Norwegian continental shelf, where we have used learnings from the oil and gas industry,” he said.
“Carbon capture and storage [CCS] is about injecting gas into formations and to monitor how it actually spreads out. We also know how to drill the wells, and we know how to put the pipelines in place for CCS injection,” he explained.
Asked by Camargo which of two strategies will prove best for oil and gas companies to pursue — diversifying into renewables and hydrogen, or focusing mainly on oil and gas — Opedal said it is still too early to tell.
“We already know from different scenarios that even in a net-zero [carbon emissions] world, in 2050 there will be a need for oil and gas — but probably less,” he said.
In Equinor’s Energy Perspectives, launched two weeks ago, the "Rebalance" scenario shows that global demand for oil and gas will be in 2050 still be around 50% of today's level.
“Independent of which strategy you choose — even for us who are working with renewables and low-carbon solutions — oil and gas will still be a part of our portfolio going forward,” he said.
“There will be less use of oil and gas beyond 2030 and we are diversifying the company so that we can utilise our competitive advantage we have built up from the oil and gas industry to move into other industries where this advantage can be utilised to create a leading position,” he added.