Enauta CEO looks to post-pandemic opportunities

Source: Energy Intelligence

 

Brazilian independent Enauta, previously known as Queiroz Galvao E&P, is a prominent player in the South American country’s oil and gas sector. It operates the Atlanta heavy-oil field in the offshore Santos Basin, where it produces about 30,000 barrels per day through an early production system. The company had been planning a major expansion and was sounding out contractors for a floating production, storage and offloading (FPSO) vessel prior to the Covid-19 pandemic. Energy Intelligence spoke to CEO Lincoln Rumenos Guardado about how the pandemic has affected Enauta’s plans, the investment climate in Brazil and the energy transition.

 

How has Enauta adapted operationally to Covid-19?

 

Lincoln: We tried to implement all the sanitary measures done by governments. We increased all of them and tried … to keep everybody at home and start to think a little bit more about how we can keep our operations safe. The first measure we took is just to reduce the people on board, trying to avoid travel, helicopters, boats and so on. Keeping the operations going, keeping people safe at home was a must for us. We’ve succeeded so far at keeping our operations ongoing. With this, we believe we’re protecting not just human beings but protecting employment.

 

Did you have to postpone any planned work?

 

We had, I can say, a perfect storm. We’ve had the crisis in the oil price … and just after that we had Covid-19. With the landscape so bad, we said ‘OK, we have to stop.’ We canceled all the bid rounds for the rig and the FPSO. Nowadays the picture is a bit clearer [so we can] start to rethink all that. Still, the country and the world is afraid of a potential second wave. We don’t want to take an initiative that we cannot afford in the future. We reviewed some projects, trying to keep capex low. But this doesn’t happen with all assets we have. We have a very important asset with Exxon Mobil and Murphy in northeast Brazil, [in] the Sergipe Alagoas Basin. The operator, Exxon, has not changed the operating plans, [so] in mid-2021, we plan to drill the first well there.

 

Will the tenders [for the rig and FPSO at Atlanta] resume now?

 

Lincoln: We are working to see if it’s possible to have new bidding for the FPSO in the upcoming months. We have a very mature concept right now. We began with a little bit higher production, but due to this movement in the oil price, we are expecting a lower [price] for a long time. The [recovery] is so slow that we have a design for the production that could be resilient for the current oil price of between $45 and $50. That’s what we are looking for right now.

 

What is the status of exploration projects planned with other companies?

 

Lincoln: For other areas, like the Equatorial Margin where we have three assets … it’s a frontier. It has all the same petroleum systems as we are seeing in Guyana and Suriname. We hope that the environmental regulator will [give us] authorization for drilling. Nowadays we are stuck in those areas, in more distant Brazil, where we have partnerships with Petrobras and Total. Hopefully we could have this authorization by beginning of next year. With that we could take the decision to buy long-lead items and be thinking about how to drill.

 

Should Brazil be doing more to help competitiveness?

 

Lincoln: Brazil became the hotspot for exploration and production for sure in the last four to five years. This is a kind of phoenix returning to the radar. Brazil has gained more and more relevance in the gas and oil market nowadays. [But] … as we saw in the last auction, the government asked too much on bonuses, and [there were] some difficulties in terms of how much you have to return to the government in the [production-sharing] contracts. I think the government nowadays has to take into account the long-term price of oil and release some of these constraints they have.

 

How is Enauta looking at the energy transition and sustainability?

 

We had gas producing in Manati field for four to five years. We believe so much in gas, we like gas. The transition is inexorable, of course. We believe that in the short and medium term, the co-existence of different energy matrixes will be the common wisdom. We believe that this kind of new approach in wind and solar should be understandable together with oil and gas. Brazil is not a country where we could look just for gas — the Brazilian basins are more favorable for associated gas. In Sergipe, we have conditions for oil and associated gas in a huge amount. In spite of that, we don’t have enough muscle to move for wind or solar. But we are following, a little bit, the big guys, to see what they are doing. And we hope that we could have … some initiatives in the future to use wind in our oil and gas operations. We hope we could see some movement to accelerate the investment in renewables. This is possible. If that happens probably we could be together in those efforts with our partners.

 

Any other thoughts on today’s challenges?

 

We are seeing a future where we are prepared to build. I think if the government could help us with some measures, we could [target] more challenging areas in Brazil. The company’s preparing for that — we have very nice liquidity, we have almost 1.9 billion reals (US$363.2 million) in cash, just waiting for some opportunities. We are facing these problems right now, but we believe Brazil has a very good forecast in terms of exploration and production. Midstream is growing so fast nowadays. The matrix is changing a little bit. And hopefully we could take the opportunity to improve our presence in this market in Brazil. We are doing some measures, to be on the safe side. We improved our presence in hedging. We used to have hedging related to the dollar, nowadays we moved the hedging to Brent, trying to mitigate the risk. We succeeded in these six months to keep our cash preserved. We hope the industry recuperates faster than we are seeing right now without any other second wave of Covid, and for people becoming confident again to work and to invest.