Why Brazil’s Origem Energia is investing in natural gas storage


Written by: Joao Montenegro

Brazil’s oil and gas watchdog ANP recently approved the development plan for the Pilar onshore field, operated by Rio de Janeiro based Origem Energia.

The asset is one of seven purchased by the company from federal oil giant Petrobras in the Alagoas basin, in the northeast of the country.

Origem plans to begin a natural gas storage project in the area, with an initial investment of US$20mn.

BNamericas spoke with Nathan Biddle, co-founder and director of Origem Energia, about the project.

BNamericas: What are Origem Energia’s next steps in the area of gas storage?
Biddle: Our development plan for Pilar, where we intend to have gas storage, was approved in mid-April by the ANP. The field concession was extended until 2052. And this guarantees that we’ll be able to go ahead with the project. In Pilar, there are three diferent reservoir systems, with various storage opportunities, and we already have ready-made infrastructure for gas injection and compression.
Gas storage involves three important factors: a competitive molecule price, low penalties and high flexibility. And it goes far beyond the thermoelectric segment.
In the last 12 years, the consumption of residential, commercial and industrial gas has practically not grown in Brazil, despite the fact that energy consumption has increased. Industries, for example, were not willing to accept the risk of high penalties [in case of a reduction in their gas demand] and low flexibility.

BNamericas: So you’re mainly targeting these segments where there was little variation in consumption in this period?
Biddle: There’s plenty of opportunity for gas if we can o”er a competitive price. Brazil’s one of the largest consumers and importers of fertilizer in the world. The US has been able to attract plants there because of its high flexibility. They have 133Bm3 of storage capacity. We’re not inventing anything, this has been done there for more than 100 years. The US saved Europe last winter [with the restriction of Russian gas amid the war in Ukraine].

BNamericas: What is the expected investment in the project?
Biddle: It will be US$20mn at first.
The big challenge in gas storage projects is that if the reservoir is too big or depleted, you have to inject a ‘base gas’ to increase the pressure. In our case, these are smaller reservoirs that have been injected with gas by Petrobras for 15 years for secondary oil recovery purposes. And we’ll be able to do this with the existing compression capacity.
Now we’re in the final stage to receive approval from the ANP to carry out gas storage as a service.

BNamericas: Origem will be contracted by what customer profile?
Biddle: There are already a variety of companies asking for price quotations, among producers, consumers and transporters. Producers who, in certain months, produce more than what was contracted from them. Transporters because they want more space to store gas. And consumers because they eventually buy more than they use. Gas distributors may also be interested. We’re building products to reach several types of clients.
And we’re getting strong support from the ANP and the MME [mines and energy ministry] because they recognize gas storage as a matter of energy security.
There have been times in the past when there was a shortage of gas during a drought period [as, with less hydroelectric availability, more thermal plants had to be activated]. We really hope to reduce the price of the gas molecule in Brazil by better balancing supply and demand.

BNamericas: What will the initial storage capacity of the project be?
Biddle: The project will have an initial flow rate of 800,000m3/d and initial volume of 200Mm3, with the possibility of expansion to 5Mm3/d and 1.5Bm3, respectively.

BNamericas: Why are the projects of Origem not exactly revitalization of mature fields?
Biddle: The basins where we operate – Alagoas and Tucano Sul – are diferent from other cases where there is, in fact, revitalization. These are two of the biggest gas basins in Brazil, and they are very underdeveloped. So the main goal is not to revitalize, but to develop in the right way. Alagoas had 596 wells drilled since the 1960s and Tucano Sul, 44 wells, while thousands of wells were drilled in basins such as Sergipe, Recôncavo and
Espírito Santo. Alagoas and Tucano have always been very rich in gas, and Petrobras has always prioritized oil. With the current wells, we’re developing gas zones to produce. In many cases, these zones have never produced.
Besides this, there are blocks where we intend to develop. I don’t like to call them exploratory blocks because they are inside oil systems that we already know. And the infrastructure we bought from Petrobras allows us to develop smaller gas fields. With this production and storage of gas, we’ll create an energy hub to o”er a molecule at a better price and develop new industries.

BNamericas: What are the company’s projections for an output increase?
Biddle: In our first year of operations, we more than tripled our gas production, jumping from 400,000m3/d to 1.5Mm3/d. In terms of oil, we more than doubled, reaching 3,000b/d.
When we took over the assets, there were 50 wells producing, today there are 150, and there are another 300, 350 that we can work on before we start drilling new wells that can further boost our output.