Shell makes Brazil one of top three countries after BG merger

RIO DE JANEIRO (Bloomberg) -- Royal Dutch Shell has made Brazil one of its top three countries after completing a merger with BG Group, and sees the South American nation’s deepwater fields remaining competitive for years to come.

Brazil “will remain a key destination country for us for investment dollars for at least another decade,” CEO Ben Van Beurden told reporters in Rio de Janeiro on Monday as Shell took control of BG’s Brazil assets. “Today we will see the birth of what will be undoubtedly the best company in our industry.”

The Hague-based driller plans to double output in Brazil by 2020 as state-controlled Petroleo Brasileiro SA expands output at a group of offshore fields in the so-called pre-salt region where Shell has become a minority partner through the merger with BG, Van Beurden said.

Shell and BG produced a combined 240,000 boed in Brazil in December, according to the National Petroleum Agency. Shell’s output in Brazil had been in decline before the merger because its main project, Parque das Conchas, started to fade several years ago.

The BG tie-up has given Shell stakes in some of Brazil’s largest discoveries, including Lula, the country’s biggest producing field. Petrobras is the operator, and Shell will start coordinating operations with the Rio-based producer this week after finalizing the merger.

While Van Beurden said there are “a lot of challenges” in Brazil, he expects oil prices to “re-balance” this year and for the region to remain competitive.

Production at the pre-salt has exceeded expectations, with many individual wells producing in excess of 30,000 bopd. This growth has helped compensate for faster-than-expected decline rates at other Brazilian fields closer to shore.