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Shale takes a backseat in Brazil despite resources

Despite the country having significant deposits of unconventional gas, there are no plans to tap into it

Don't expect a shale revolution to land on Brazil's shores anytime soon. The country likely has significant deposits of unconventional gas, but tapping those resources would require a major effort that neither the government nor state-owned Petrobras are prioritising.

Brazil will put vast tracts of gas-rich lands up for auction in late October this year in the 12th licensing round, including basins with shale-gas potential. The final list of blocks for the round has yet to receive final approval, but it will likely include acreage across six basins with total unconventional gas resources estimated at around 500 trillion cubic feet, though little drilling has been done so the figures remain speculative. Those lands, though, also hold significant conventional gas deposits that will likely be explored first.

"At the moment we have possibilities for conventional and unconventional gas. But conventionals are cheaper than unconventional so I think companies will prefer to start with the conventionals," Magda Chambriard, the head of Brazil's upstream regulator the ANP, told Petroleum Economist. "It will be up to the concessionaire."

Chambriard also raised concerns about the potential environmental impact of hydraulic fracturing in unconventional-gas exploration. The process, which involves pumping large amounts of water along with sand and chemicals into wells to stimulate production, has proved controversial, and has been banned in some places.

"If the concessionaire goes after non-conventional gas there will be a lot of care, environmentally speaking, for these projects," Chambriard said. Last year, the government said that it was looking to use the International Energy Agency's "Golden Rules for a Golden Age of Gas", a set of best-practice guidelines for unconventional gas development, as a blueprint for new rules for the sector, but little progress appears to have been made.

Analysts have also warned that the most prospective unconventional gas deposits lie far from transport infrastructure, and that the country lacks a services sector with equipment and expertise in shale-gas development.

If there is going to be a push into shale-gas development it will have to come from foreign companies or the new crop of Brazilian independents. State-owned Petrobras, which dominates the industry in Brazil, is stepping up investment in onshore gas, but does not plan to lead the way on shale gas.

"Our priority is to continue doing what we are doing offshore," Petrobras chief executive Maria das Graças Silva Foster said in Houston in May. "Our focus first is oil, second is oil, third is oil then natural gas... shale gas is not a priority for us."

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