Natural gas utilization and flaring reduction in BrazilPetrobras Experience

Carlos Augusto ARENTZ PEREIRAPetrobras - G&E/Energy Efficiency

Denis Krambeck DinelliPetrobras - E&P/Gas Production Planning

Agenda

• Natural Gas Consumption• Gas Production Scenario and Forecast• Energy Conservation Program• Gas Recovery • Gas Flaring Reduction Initiatives• Opportunities• Conclusions

Facts about natural gas usage in Brazil

• Natural gas –Source with greatest increasing rates on brazilian matrix;

–Participation more than doubled in last 8 years:

• From 3.7% (1998) to 9.3% (2005)

– It has been displacing many oil products.

Brazilian Energy Matrix 2005

HYDROPOWER15%

URANIUM1%

CRUDE OIL AND PRODUCTS39%

SUGAR CANE AND PRODUCTS

14%

NATURAL GAS9%

COAL AND PRODUCTS

6%

OTHER RENEWABLES3%

WOOD AND CHARCOAL13%

Brazilian Energy Consumption

CRUDE OIL AND PRODUCTS

NATURAL GASCOAL AND PRODUCTS

URANIUM

HYDROPOWER

WOOD AND CHARCOAL

SUGAR CANE AND PRODUCTS

OTHER RENEWABLES

0%

20%

40%

60%

80%

100%

197019

7119

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

05

16.3 15.8 16.1 17.7 18.921.7

25.5

30.1 30.433.3 32.8

34.937.3 36.75.3 6.1

7.58

7.8

7

6.37.8

9.4 10.4

10.9

10.9 11.3

0

5

10

15

20

25

30

35

40

45

50

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

NON ASSOCIATED

ASSOCIATED

Natural gas production evolution in Brazil (million m3/d)

7.3 % p.y.

4

Petrobras in numbers

16 Refineries with a capacity of 2,125 millions bpd

Gross RevenueUS$ 41.2 billions

ethylene production: 2,4 millions ton/year

gas sales: 52 million m3/day 9 thermopower stations 3,2 GW

proven reserves: 11.8 billions of boe (SEC 2005)

oil and gas production:* 2,20 million boe/day

(SEC 2005) 6,933 gas stations in Brazil (34% retail market)

25% of retail market in Bolivia and 14% in Argentina

746 gas stations in Argentina105 gas stations in Bolivia

Pipelines: 30.318 km

Natural GasNatural Gas

PetrochemicalsPetrochemicals RetailingRetailing

E&PE&P

*Brazil and abroad

Refining, Transportation,

Trading

Refining, Transportation,

Trading 50 vessels fleet

Consequences of natural gas usage at Petrobras

• For many years Petrobras was the single biggest NG consumer:

– Up to 58% of whole country consumption in 1990;– Became major energy source for Petrobras;– Displaced mainly fuel oils – specially on refineries;– This required major adaptation on furnaces and boilers;– Market development has increased in last 10 years:– Petrobras consumption was in 2005 only 30%.

• Natural gas source promoted:– Reducing emission on specific pollutants like sulphur oxides and

particulates;– Reducing GHG emissions per energy equivalent consumption;– Cogeneration projects;– All these enhanced gas flaring reduction projects.

Fuel consumption Matrix – Petrobras - 2005

FUEL OIL18%

OTHER1%

DIESEL3%

NATURAL GAS46%

REFINERY GAS17%

RESIDUAL GAS1%

CAT CRACKING COKE14%

Fuels consumption at Petrobras (tPE/year)

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

1990 1991 1992 19931994 1995 1996 1997 1998 1999 2000 20012002 2003 2004 2005

FUEL OIL DIESEL NATURAL GASREFINERY GAS RESIDUAL GAS CAT CRACKING COKEOTHER

Energy conservation program

• Petrobras has an Energy Conservation Program since 1974

–PETROBRAS Energy Consumption in Brazil: • aprox. 242,000 bpd;

–From 1992 to 2005 this program allowed:• savings of 2,800 bpd oil equivalent;• Fuel oil, diesel, refinery gas, cat cracking coke, natural gas;

– It has been reducing internal consumption by 1% per year;–Results at least US$ 220 million - Return rate of 30 % per

year:• equals 1.5 million tPE and 5 million t CO2 emissions avoided;• Results equal one year results of a 170,000 bpd refinery;• Helped company achieve Dow Jones Sustainability Index

Case – Gas flaring utilization

• Gas flaring used to generate power at Sergipe since 2002

–Due to distance from market gas was flared at one production field – Atalaia 36,500 m³/d

–Electrical Power purchased from local distributing company–Opportunity to generate and replace purchased power–Gas turbine 5.2 MW – supplied whole site demand– Investment US$ 2.5 million–NPV US$ 3.3 million - rate of return 41% per year–Reduced average energy production cost–Avoided flaring–Promoted better energy efficiency in whole site

• Improvements ahead

Increase on Energy EfficiencyPetrobras - Brasil

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Energy equivalent bpd

500 000

700 000

900 000

1 100 000

1 300 000

1 500 000

1 700 000

1 900 000

2 100 000

Production/ Refinning bpd

ENERGY CONSUMPTION

CRUDE OIL REFINING

OIL AND GAS PRODUCTION

Dow Jones Sustainability Index

Eco-Efficiency / Environmental Performance

85

100 100 100 100

78

100

78

70

55

4449

6365

27

0

10

20

30

40

50

60

70

80

90

100

2002 2003 2004 2005 2006Year

Sco

re

Average score

Best Score

Petrobras score

On this evaluation at Environmental Dimension Eco-efficiency criteria Petrobras has achieved 100%, best result on peer group. Acknowledgement to our efforts on Energy Conservation.

Petrobras: overview of domestic E&P

• Reserves (at December 31, 2005)– Proven reserves of 13.23 billion boe (SPE) – or 10.58 billion boe (SEC)– Reserve / Production Ratio of 19.7 years (SPE)

and 15.7 (SEC)– Internal Reserve Replacement of 131.1%

(SPE) and 101.3% (SEC)

• Production (2005)– 1,958 thousand boed (1,684 thousand bpd

oil)– 5-year CAGR of 5.6%

• F&D Cost– US$ 3.45/boe (2003 – 2005) – SPE

• Lifting Cost– US$ 5.73/boe (2005)

• Exploratory Area (Nov/2005)– 157.7 thousand km2 (Petrobras + Partners)– 153.4 thousand km2 (other Companies)

Total: 311.1 thousand km2

Natural gas utilization in Brazil – 2006Till september

E&P Internal Use

7.8 million m3/d

Flare:5.1 million m3/d

Injection: 8.6 million m3/d

Liquefied PG

1.6 million m3/d Imported:24.7 million m3/d

PB Refineries /Urea Plants:Consume: 7.2 million m3/dLiquefied: 1.9 million m3/d

Market:39.5 millionm3/d

Production 48.0 million m3/d:- 36.5 million m3/d associated (78 %) - 11.5 million m3/d non-associated (22 %)

24.9 million m3/d

Associated gas production and flaring in Brazil

Associated Gas Production -2006 (till september)

Northeast14,0%

Santos Basin0,3%

Campos Basin57,2%

Espírito Santo Basin3,4%

North25,1%

Gas Flaring & Venting - 2006 (till september)Northeast

7,9%Santos Basin

2,2%

North8,9%

Espírito Santo Basin15,9%

Campos Basin65,1%

Associated gas utilization index

• Measures the percentage of the associated gas produced that's sold or utilized in Petrobras’ E&P internal processes.

• IUGA = Associated Gas UtilizedAssociated Gas Produced

= (Associated Gas Produced – Flaring and Venting)

Associated Gas Produced

Associated gas utilization evolution in Brazil(Million m3/d)

50% growth in associated gas production

3,3 million m3/d reduction in gas flaring

13% improvement in gas utilization

- Beginning of production in two new platforms: P-50 and FPSO-Capixaba (Albacora Leste and Golfinho fields).

Associated gas utilization evolution : CAMPOS BASIN (Million m3/d)

22% improvement in gas utilization

3,5 million m3/d reduction in gas flaring.

Result of the Campos Basin’s Gas Utilization Optimization Program (POAG)

Gas recovery initiatives

• From 1992 to 1997 many projects promoted gas flaring reduction:

–Close to 1 million m3/d of gas flaring avoided–A series of studies were developed in parallel aiming at

flaring reduction, analyzing main gas flaring causes

• At the same time, legislation over flaring avoidance became stricter

• The best options for flaring reduction were united in an Action Plan in 2001: Campos Basin’s Gas Utilization Optimization Program - POAG

Campos basin’s gas utilization optimization program (POAG)

• POAG consisted 93 actions determined to improve associated gas utilization in 24 platforms like:

– installation and revamp of compressors

–new gas pipelines

–optimization of the processing plants

• Potential gain in gas utilization of 4.2 million m3/d

• Total investment of approximately US$ 200 million

• 91 actions concluded; the remaining two will be concluded until feb/07, providing a gas utilization improvement of 0.7 million m3/d

Campos basin’s gas utilization optimization program (POAG)

• Besides POAG, US$ 98 million have been invested in two gas injection projects:

–up to 2.4 million m3/d of the associated gas can be stored in case of processing, transporting or marketing problems onshore

• Petrobras also invested in workforce’s training and qualification, in a partnerships with ANP – Brazilian Petroleum Agency - and the Federal Technological Center through courses and forums on best operational practices

Petrobras air emissions management system(SIGEA)

Petrobras air emissions management system(SIGEA)

Interface

Au

tom

ati

c d

ata

acq

uis

itio

n

Inventory Data bank

Rep

ort

s

E&P sources

Pro

tocol

APIARPELOGP

Actions to manage emissions

Petrobras air emissions management system(SIGEA)

What’s the forecast for gas flaring in Brazil?

Associated gas utilization evolution in Brazil(Million m3/d)

Utilization’s stabilization around 91%

Beginning of production in new platforms: P-54, P-52, P-51, P-53, P-55 and P-56

Ghg cumulative emissions: Forecast

GHG emitions in E&P activities (t)

0

5.000.000

10.000.000

15.000.000

20.000.000

25.000.000

30.000.000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

E&P Total GHG emissions avoided

Total GHG emissions avoided

Further improvement in gas utilization:Opportunities under evaluation

• All new projects are designed with better energy efficiency concepts and enhanced gas recovery:

–challenges are related specially to logistics: scattered production and farther from seashore;

• Additional reductions on gas flaring beyond those achieved with POAG come up against technical and economical challenges;

• Two opportunities are currently under study in Petrobras’ Research Center (CENPES):

–Compressed Natural Gas (CNG);

–Liquefied Natural Gas (LNG).

Conclusions

• Since the 1990s Petrobras has been promoting significant gas flaring reduction based on energy conservatio

• Tangible improvement in associated gas utilization between 1999 and 2004 (75.7 % x 88.7%), due mainly to the investment made in Campos Basin aiming gas flaring reduction (POAG)

• Up to 2005 Petrobras has been avoiding at least 5 million m3/d natural gas flaring daily from 1993

• On the long-term, stabilization of associated gas utilization around 91%

• Petrobras is still searching for better and improved means of raising its production altogether with minimum gas flaring

Challenge is Our Energy

Keep the challenge

Make energy last

Use the right amount

Carlos Augusto Arentz PereiraPetrobras - G&E/Energy Efficiency

caarentz@petrobras.com.br

Denis Krambeck DinelliPetrobras - E&P/Gas Production Planning

dkdinelli@petrobras.com.br

THANK YOUTHANK YOU