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Global oil and gas exploration company Karoon has its eyes fixed on the horizon. The firm expects to start production in Brazil by 2020, when it hopes prices will have bounced back. It is also working on deepwater drilling plans in Peru.
The company's general manager for South America tells BNamericas more.
BNamericas: Oil companies are adapting. How about Karoon? What's the long-term vision?
Hosking: It's important to highlight that, since Karoon is in a pre-production phase, the current drop in oil price works towards the company's advantage. We finished two very successful campaigns in Brazil from 2012 to 2013 and from 2014 to 2015, both on time and under budget. Karoon has drilled six wells and made three important discoveries, which were named as Kangaroo, Bilby and Echidna. Therefore, it's not a question of adapting, but working proactively.
BNamericas: What's the next step for Karoon?
Hosking: We're using our strong cash position and no debt to analyze good assets available in the Brazilian market and also taking advantage of the low-cost environment from suppliers and contractors. Karoon is now preparing the third phase, focused on the appraisal of Echidna to prove commercial quantities of oil.
BNamericas: Soon, Karoon will hire the first production unit and start to monetize its oil production. What are the challenges of developing a project of this size in this context?
Hosking: If everything goes as planned, our preliminary expectations are to start production around 2019 or 2020, when I believe we'll have better oil price conditions. As for where we are today, we see a lot of advantages. For example, [the] oil market is distressed, we're seeing a significant decrease in capex and in the future opex costs. In addition to that, Karoon is in a stronger negotiating position with suppliers and contractors and we've also been able to attract excellent Brazilian talents to our team.
BNamericas: Karoon is one of the few independent oil companies operating in Brazil. Unless I'm mistaken, the only one conducting a greenfield exploration project. What could you say about operating in Brazil?
Hosking: We're very pleased with our results in Brazil. Karoon has a good project in the country. We've put together a fantastic and very experienced Brazilian team, and developed very good relationships with local authorities and partners. Along with our three discoveries, Karoon is very optimistic for its Brazilian operations over the coming years. We believe there are good opportunities for mid-sized companies in Latin America, either through disinvestments by other companies or new bids. Due to a low oil price environment, more opportunities may arise in the Brazilian market.
BNamericas: What about Peru? How important is this market to Karoon?
Hosking: Brazil and Peru are two key growth assets for Karoon. In Peru we operate in two areas, one onshore, Marañon, and one offshore, Tumbes. Karoon will be the first company to drill deepwater wells in Peru. Besides that, we are well underway in obtaining all the regulatory approval. We're very excited about the Tumbes prospect. The expectation is to start drilling in the next 12 to 24 months and tendering rigs and other support vessels in the next 6 to 9 months.
BNamericas: Is there room to expand Karoon's portfolio? Brazil or Latin America are priorities?
Hosking: Yes, Karoon has been looking for new projects with a focus on Australia, Brazil and Peru. We've built up a wealth of Latin American experience in our office that provides Karoon an advantage in identifying good assets.
BNamericas: Is there any interest in attracting new partners for future projects?
Hosking: For now, Karoon is concentrated on developing its projects with the partners we already have in place. If we see an increase in oil prices, we may begin to structure further farm out processes.
About Tim Hosking
Tim Hosking has extensive experience in the Latin American oil and gas sector, overseeing Australia-based Karoon's operations since 2009. Hosking was responsible for contracting and implementing three seismic acquisitions, the drilling of six exploration wells and the planning of three drill stem tests for a follow-up appraisal program.