Unocal unit acquires interest in proved Brazil oil, gas offshore properties
El Segundo, Calif., June 29, 2000 - Unocal Corporation today said that its Potiguar II, S.A.R.L. (Potiguar II) affiliate and Petroleo Brasileiro S.A. (Petrobras) have signed a participation agreement for Potiguar II to acquire an interest in the Pescada-Arabaiana oil and gas project offshore Brazil.
Potiguar II is an affiliate of Unocal's Union Oil Company of California subsidiary and El Paso Energy International, with each company holding a 50-percent interest.
The agreement covers the acquisition of an initial 79-percent participating interest from Petrobras in 5 concession areas containing 5 proven oil and gas reservoirs, plus an initial 35-percent interest in a 55,000-acre (224-square kilometer) exploration block. Potiguar II's participating interest in the project will be adjusted in the future in accordance with the economic performance of the project.
The Pescada Arabaiana Integrated project currently consists of four emission free, solar powered production platforms and a 43-mile (73-kilometer), 26-inch (66-centimeter) multi-phase pipeline already in operation. An exploratory well in BPOT-1 block will be drilled prior to August 2001 and two additional production platforms will be installed in 2001. Petrobras will continue as operator for the project.
The properties, located in 65 feet (20 meters) of water offshore the northeastern Brazilian state of Rio Grande do Norte, have gross proved developed and undeveloped reserves of 27 million barrels of oil and 381 billion cubic feet (11 billion cubic meters) of gas. The concessions also hold an estimated additional gross resource potential of 40 to 60 million barrels-of-oil-equivalent (BOE).
Unocal estimates that its total investment in the project may reach US$80 million over the next 3 to 5 years. Total net finding, development and acquisition costs, after royalties, are estimated to be in the US$4-5/BOE range.
"The Pescada-Arabaiana Integrated Project brings immediate earnings and proved reserves to Unocal, as well as upside potential for additional production and reserves in the near future," said Sergio Brandao, managing director of Unocal's Brazil business unit. "This project will balance Unocal's exploration portfolio with an interest in producing assets in Brazil and is expected to generate earnings and cash flow to fund
Unocal's broader exploration program on its deepwater offshore blocks in the country."
The Potiguar basin is the second largest hydrocarbon-producing basin in Brazil. The basin currently produces an average of 110,000 barrels of oil-per-day (BOPD) and 100 million cubic feet (2.8 MM cubic meters) per day (MMCFD) of natural gas.
Annual gross production from the Pescada-Arabaiana project is expected to reach 6,500 BOPD and 55 MMCFD (1.6 million cubic meters per day) of natural gas by 2003 from 10 wells. The producing fields include the Pescada field (gas/condensate), the Arabaiana field (natural gas) and RNS-33 field (oil). The project also includes proved, undeveloped oil and gas resources on the RNS-93 and RNS-128 blocks. All production will be taken to Petrobras' onshore Guamare processing plant through the existing multi-phase pipeline.
The participation agreement provides for the sale of gas and liquids to Petrobras at the Guamare plant for further distribution to growing energy markets in northeast Brazil.
About Unocal Corporation
Unocal is one of the world's leading independent natural gas and crude oil exploration and production companies. The company also focuses on pipeline and power plant projects in Asia and the Americas. At year-end 1999, Unocal had worldwide natural gas reserves of 6.6 trillion cubic feet, representing two-thirds of the company's overall hydrocarbon reserves. Unocal's net worldwide natural gas production averaged more than 1.8 billion cubic feet per day. This includes 1 billion cubic feet per day in North America, where Unocal is one of the largest independent natural gas producers.
Forward-looking statements regarding exploration and development activities, reserves, resource potential, and forecasted production levels in this news release are based on assumptions concerning operational, market, competitive, regulatory, environmental and other considerations. Actual results could differ materially as a result of factors discussed in Unocal Corporation's 1998 Form 10-K report filed with the Securities and Exchange Commission.
Updated: June 2000