Ucayali Basin and the Camisea Megacampo

Further south in Peru, the Ucayali Basin occupies a broad stretch of the Andean foothills and adjacent piedmont. It is a foreland basin located between the Contaya Arch in the North and the Manu arch in the South. Its most significant component is the Camisea gas field, which was discovered by Shell Oil in the mid 1980s, as well as a half dozen smaller production wells near the town of Aguaytía. Camisea is located in the extreme southern margin of the Ucayali Basin in a unique area where the juxtaposition of several thrust-and-fold belts led to the geological entrapment of extraordinarily large volumes of natural gas and associated liquids, the latter of which are molecularly similar to gasoline and particularly valuable as an energy commodity. As of 2020, there were 32 production wells operating in three concessions (Lotes 56, 57, 88). The wells are run by the Camisea consortium, which is led by PlusPetrol, the same company that recently abandoned its concessions (and environmental liabilities) in Northern Peru. Development of a fourth Camisea concession (Lote 58), which is held by the China National Petroleum Company (CNPC) is on hold while the company reviews its environmental impact statement and the logistical constraints that limit its ability to monetize the concession’s hydrocarbon reserves.

The Camisea wells are connected to a processing plant operated by Transportadora de Gas del Peru (TGP), which separates the liquids and gas prior to injection into two parallel pipelines. Approximately 60% of the natural gas is consumed domestically, while the rest is exported as liquefied natural gas (LNG). In 2020, Camisea produced about 619 billion cubic feet (17.5 billion cubic meters) of gas and 37 million barrels of oil with a combined nominal value of approximately US$2.8 billion. This generated more than US$460 million in revenues for the state, of which about fifty per cent was returned to local and regional governments. Between 2012 to 2022, the Cusco Region and its constituent jurisdictions received ~US$1.7 billion via the canon system of revenue sharing. Cusco shares the benefits of 1,681 direct jobs with Pisco where the export terminal is located, as well as of ~30,000 indirect jobs in Lima, the principal market for natural gas.

Project proponents highlight the benefits of domestic gas production, which has saved an additional US$10–20 billion in oil imports, while avoiding higher greenhouse gas emission when natural gas is compared to either oil or coal. Less appreciated is the role that Camisea has played in the demise of several large-scale hydropower facilities that were abandoned because they were not economically competitive with natural gas.

Hydrocarbon development in the tropical landscapes of Cusco Region was opposed by Indigenous groups and environmental advocates because the gas fields are adjacent to territory known to be inhabited by several Indigenous tribes living in voluntary isolation. Their presence, and the need to ensure the development of Camisea, motivated the government to upgrade the status and improve the legal protection of the Kugapakori Nahua Nanty Indigenous reserve. Regardless, the project has been beset by controversy because neither the Peruvian state nor the operators adhered to the principles of free prior and informed consent (FPIC) during the construction of the pipeline.

Difficulties regarding FPIC likewise have impeded the development of Lote 58, which has an additional 2.3 trillion cubic feet of gas. A more relevant constraint, however, is limited pipeline capacity because the current pipeline (TgP) is operating at capacity. A second pipeline (Gasoducto del Sur), which was under active development between 2010 and 2016, would have significantly enhanced Peru’s export capacity and integrated its southern regions into a gas-dominated energy grid. Pipeline construction was halted in 2017, however, when the primary contractor, Odebrecht SA, became embroiled in the Lava Jato bribery scandal that led to the bankruptcy of its pipeline subsidiary and the prosecution of two Peruvian presidents.

The project was about 35% complete when construction was halted and most of its component parts (steel pipe) are in Peru waiting for resolution of the project’s bankruptcy proceedings. The spike in natural gas prices in 2022 has renewed efforts by its proponents to complete the project, which has been rechristened the Sistema Integrado de Transporte de Gas al Sur (SIT Gas). The current holder of Lote 58 (CNPC) would be a logical candidate to finance the completion of the pipeline. However, the inevitable production declines in the adjacent concessions will eventually create capacity within the existing TgP pipeline.

Madre de Dios

The next sediment basin to the south includes most of the Madre de Dios in Peru as well as adjacent areas in Pando, Bolivia. It is broadly similar to the Ucayali Basin in structure and age with a fold-and-thrust belt close to the Andes. It has been the object of considerable exploration over the last twenty years, starting with seismic surveys and exploratory wells drilled by Mobile Oil (now Exxon Mobil) and Texaco (now Chevron) in the mid 1990s. The presence of oil-bearing deposits was verified but these were deemed non-economic due to low volumes and the high cost of transporting the oil to market.

Another potential natural gas deposit was identified in Block 76 with resources once estimated at 8.7 trillion cubic feet of natural gas. The first exploratory well ‘underperformed’ expectations and the company, Hunt Oil, returned the concession to the state in 2018. The decision to halt its development occurred during the slowdown in the hydrocarbon sector that followed the collapse of oil and gas markets in 2014. The depressed market, when combined with the paralysis of the Gasoducto del Sur, also froze the construction of a third gas pipeline that would have been required to develop the potential reserves believed to exist in the Madre de Dios.

The retreat of companies from Madre de Dios is characteristic of the travails that have characterized the sector in the rest of Peru where the total number of concessions under development fell from 87 in 2010 to 30 in 2020. The rebound of global oil and gas markets in 2022 may have changed this financial calculus, but the investment case for developing more gas projects in Peru must be weighed with the risk of social conflict, environmental liabilities and the increased competitiveness of solar power on the coastal desert.

The foreland-sediment basins in Bolivia have similar structural and stratigraphic attributes as their Peruvian counterparts. World-class gas reserves are being exploited in the Santa Cruz- Tarija Basin, which are located on the southern margin of the Amazon watershed. It is widely assumed that there are similarly large hydrocarbon reserves in the adjacent Beni Basin, which is separated from the Madre de Dios by the Madidi Arch. Exploratory efforts by Texaco in the 1990s and PDVSA in the 2000 have failed to discover any significant reserves, but the state-owned oil company (YPFB) continues to explore for oil and gas.

The Solimões Basin and the Urucú Gas Field

The Solimões sedimentary basin is an extensive geological province located in the centre of the continent. In the West, it is bounded by the Iquitos Arch that delineates it from the POM basin and in the East by the Purus Arch that separates it from the Amazon sediment basin. The conventional reserves are located in a typical petroleum system: the source rocks are Devonian shales and the reservoir rocks are Carboniferous sandstones with traps that were formed during the Jurassic when tectonic forces warped the strata into anticlines. The Devonian shales are relatively thick with significant quantities of organic carbon (2% and 5%), which makes the viable candidates for hydraulic fracturing and the production of shale gas.

Urucú is the name used by Brazilian geologists for an oil and gas discovery within the Solimões. It is the largest onshore deposit of conventional oil and gas resources in Brazil. The total area spans 3.8 million hectares in the approximate centre of Amazonas state, which is subdivided into seven production blocks operated by Petrobras (83,000 ha) and sixteen exploratory blocks (3.7 million ha) held by Rosneft, the state-owned Russian oil company. Estimates of the proven and probable reserves range between 1.1 and 5.2 trillion cubic feet of conventional natural gas, while the potential recoverable resources of shale gas may be as high as 16.5 trillion cubic feet – approximately equivalent to those at Camisea.

The first discovery was made in 1986 after more than a decade of exploration. Production started in 1989, but initial volumes were limited by a lack of transportation infrastructure. This was resolved in 1998 by the construction of a 280-kilometre pipeline between the Urucú separation plant and the river terminal near Coari (Amazonas) where liquids and compressed gas could be commercialised using river barges. In 2009, a second parallel pipeline was built and another that extended 360 kilometres to Manaus with seven branches supplying natural gas to thermoelectric plants that generate electricity in small municipalities on the north bank of the Solimões river.

Operations were managed by a Petrobras subsidiary, Transportadora Associada de Gás (TAG), until 2020 when it was sold to Engie Brasil.

Production of liquids has declined steadily since 2000 (45,000 to 15,000 bpd) because Petrobras preferentially harvested gas-liquids. In contrast, production of natural gas has increased over the same period (245,000 to 530,00 cubic feet per day). The two commodities are divided at the separation plant and excess gas is reinjected into the wells. This imbalance should have been resolved in 2009. However, Petrobras overestimated demand for natural gas in Manaus, and the pipeline has operated at about sixty per cent capacity. The nominal revenues are ~US$1.1– $US2.1 billion annually from the sale of natural gas and ~US$550 million from liquids.

Despite the apparent lack of demand, Rosneft acquired the rights to all thirteen exploratory blocks in 2014 and mounted exploratory operations between 2017 and 2019. Eneva, a mid-sized Brazilian energy company, purchased the Juruá concession, which is located 100 kilometres west of Urucú, from Petrobras in 2019. Apparently, Eneva intends to develop the reserves that were discovered in the late 1970s either by building an extension of the Urucú-Coari pipeline or by developing a liquified natural gas (LNG) system.

Business groups in Manaus have long lobbied for an expansion in the Urucú pipeline system arguing that inexpensive gas will catalyse investment in the Manaus Free Trade Zone. They are joined in their boosterism by civic groups and politicians from Rondônia that seek to extend the pipeline system from Urucú to Rondônia. Presumably both Rosneft and Engie are evaluating the feasibility of exporting liquefied natural gas (LNG) to export overseas markets or to aluminium smelters in Belem. There is no shortage of reserves, particularly if the shale gas is exploited using fracking technology. Less certain is the profitability of the enterprise since the high prices for LNG in 2022 are dependent upon a war that will, eventually, come to an end.

The development of the first phase of the Urucú complex occurred when the cultural and political environment was more open to fossil-fuel development in the heart of the Amazon. Indigenous groups and environmental advocates mobilised to oppose the second fleet of pipeline projects in the early 2000s. They were not able to derail the construction of the Ucurú–Coari–Manaus pipeline, but they were successful in stopping the pipeline to Rondônia. Petrobras had signed a contract with an international corporation in 2000 and obtained a licence from the environmental agency (IBAMA) in 2005. In 2006, however, a federal judge acting on a complaint filed by the public prosecutor invalidated the environmental licence and instructed Petrobras to comply with a series of protocols, including obtaining the free prior and informed consent of Indigenous communities.

The fate of these three pipelines reveals how infrastructure and energy projects might fare in the future, as well as suggesting the motive of past governments in allocating land rights in the Urucú region. The Urucú–Porto Velho project was rejected largely because it would have infringed upon Indigenous lands. In contrast, the Coari–Manaus segment only marginally impacted ribeirinho (non-Indigenous) communities on the north bank of the Amazon River that benefitted from reliable and affordable electrical energy. Most remarkable is the absence of any Indigenous territories or conservation units near the Urucú complex. Most of the protected areas in the Brazilian Amazon were created in the 1990s and 2000s, while the potential of Urucú has been known since the late 1980s. Presumably, no Indigenous communities resided within or adjacent to this strategically important landscape. Otherwise, the national authorities would have been obliged to create a territorial entity that would have significantly impeded their ability to develop this non-renewable natural resource.

The Amazon Sedimentary Basin

The total petroleum system that describes the hydrocarbon resources of the Amazon Sedimentary Basin has many similarities to the Solimões Sedimentary Basin. Source rocks date from the Devonian, and the reservoir of conventional gas and oil is located within Carboniferous strata, deep in the Amazon Rift Valley between Manaus and the Ilha do Marajó. The basin is delimited in the West by the Purus Arch and on the East by the Gurupá Arch, a geographic feature that once separated the Proto Amazon River from the Atlantic Ocean. The traps that confine the conventional deposits are linked to extensional faulting and, apparently, a layer of salt in the Nova Olinda formation that is also the source of the Amazon’s potash reserves.

The presence of fossil fuels was first discovered in 1998 and identified as a potential commercial deposit in 2004. The verification of exploitable reserves was confirmed in 2016 and production started in 2021. The discovery is not large, with proven reserves of only 7.1 billion cubic feet of gas. Petrobras sold the concession, Campo de Azulão, as part of its corporate strategy to liquidate assets in order to reduce its debt load. The concession was acquired by Eneva, the same company that recently came into possession of the Juruá concession near Urucú and the operators of the Paranaíba gas field in Maranhão. According to their corporate website, Eneva will commercialise the gas by shipping liquified natural gas (LNG) to Roraima in trucks or by generating electricity at Azulão and injecting electricity into to the Tucurí–Manaus high-tension line that was constructed in 2013. The former is a business model that is viable only because the Waimiri Atroari Indigenous group has blocked the extension of the regional power grid to Boa Vista.

The limited current production from the Amazonas Sedimentary Basin belies its potential production. Estimates of shale-gas resources range from 21 to 37 trillion cubic feet, which would have a nominal value between US$50 and US$200 billion when calculated at international prices before the war in Ukraine. There are no evident plans to develop this hydrocarbon resource, all of which is located within fifty kilometres of the main stem of the Amazon River.

Offshore deposits: Guiana, Suriname and the Foz de Amazonas

The presence of hydrocarbon deposits on the continental shelf of the Guiana Coast has been suspected by petroleum geologists for decades due to the theory of plate tectonics that posits northeast South America and northwest West Africa have a shared geological history. In 2011, Tullow Oil, a UK-based oil and gas exploration company with experience in West Africa, discovered a large gas and oil reserve off the coast of French Guiana. This discovery triggered a surge in exploration activity that has attracted dozens of oil companies, including the so-called super-majors who participate in exploratory activity only when the potential volumes meet the scale of their global market.

The Total Petroleum System of the offshore sedimentary basin is substantially different from those located within the interior of the continent. The source rock is a large marine mudstone deposited at the beginning of the Cretaceous, while the reservoir rocks are porous limestone and sandstone formations from the Paleogene (Eocene to Miocene). The area is characterised by abundant tectonic faults that created multiple traps, while maturation of the hydrocarbon molecules is believed to have occurred within both the migratory pathways and traps. In other words, the resources are not only massive but relatively recent in geological time-scales. The US geological service (USGS) estimated the basin might contain undiscovered conventional resources of more than fifteen billion barrels of oil and thirty trillion cubic feet of natural gas, which would make it larger than all of the conventional onshore Amazonian hydrocarbon reserves combined.

As of August 2022, the largest discoveries were located offshore of Guyana where ExxonMobil has drilled 36 production wells with estimated reserves of eleven billion barrels. Just over the border in Suriname, Total has announced discoveries surpassing three billion barrels of oil equivalents, a term the industries use to report the combined energy potential of both gas and oil reserves. These discoveries, and their dimensions, suggest that the USGS significantly underestimated the region’s potential. Recent investment in the region, apparently, has surpassed recent investment in the Gulf Coast of the United States.

The development of hydrocarbons in Suriname and Guyana has the broad support of their citizens, in large part because these countries do not have an abundance of other development options. In contrast, opposition to the oil industry’s operations in French Guiana reflects public opinion in that nation’s European jurisdictions. In 2017, the national government promised to ban new oil and gas concessions as part of its commitment to renewable energies. The French super-major, Total, ceased its exploratory operations in 2019 after drilling multiple exploratory wells without making a significant find.

A similar exploration boom is occurring off the coast of Amapá, Brazil, in a sedimentary sub-basin known as Foz de Amazonas. This area was the object of extensive exploration activities in the 1970s with discoveries described as ‘shows’. However, none produced sufficient volumes to justify a commercial development. The discovery of oil in adjacent regions has stimulated a resurge in interest and new exploration efforts are underway.

Environmental concerns may complicate the development of the offshore resources of Amapá because Brazilian scientists discovered an atypical reef-like ecosystem across 1,000-kilometre stretch of continental shelf off Amapá, which supports a unique community of organisms that have evolved to thrive in the sediment plume expelled from the mouth of the Amazon River. In September 2022, the public prosecutor’s office in Amapá and IBAMA requested a court to suspend the company’s operations, alleging it had failed to adequately consult four Indigenous communities on the coast who depend on the native fisheries for their livelihood. Petrobras has rejected the accusation stating that they did, in fact, conduct a public consultation as required by Brazilian law.

“A Perfect Storm in the Amazon” is a book by Timothy Killeen and contains the author’s viewpoints and analysis. The second edition was published by The White Horse in 2021, under the terms of a Creative Commons license (CC BY 4.0).

To read earlier chapters of the book, find Chapter One here, Chapter Two here, Chapter Three here and Chapter Four here.

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Mayra Editor

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ActivismAmazon BiodiversityAmazon MiningBiodiversityEnvironmentIndigenous PeoplesOilResearchTropical ForestsBrazilLatin AmericaPeruSouth America

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