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  HOME | Oil, Mining & Energy (Click here for more)

Petrobras Starts Tests at Massive Offshore Oil Field

RIO DE JANEIRO – Brazilian state-controlled energy giant Petrobras has begun pumping the first crude from the massive, ultra-deep Tupi field, estimated to contain 5-8 billion barrels of recoverable oil equivalent.

In a ceremony Friday in Rio de Janeiro attended by President Luiz Inacio Lula da Silva, several of his ministers, as well as artists, labor union leaders and sports stars, Petrobras unveiled a small barrel of oil that had been extracted earlier in the morning from the giant offshore field.

In a symbolic gesture before dozens of photographers and television cameras, Lula and the other celebrities raised the barrel and held it aloft like a sports trophy.

The Tupi accumulation, located in the Santos Basin some 290 kilometers (180 miles) off the coast of the states of Rio de Janeiro and Sao Paulo, is the first field Petrobras has begun to develop in the 800-kilometer-long (500-mile) and 200-kilometer-wide “pre-salt” region.

That region – which also includes the even larger Sugar Loaf field – is so-named because the up to 80 billion barrels of recoverable light crude it is estimated to contain are located under a thick layer of salt far beneath the floor of the Atlantic Ocean.

The concession to explore and develop hydrocarbon reserves in the BM-S-11 block containing Tupi was granted to a consortium led by Petrobras with a 65 percent stake, while Britain’s BG Group and Portugal’s Galp own 25 percent and 10 percent, respectively.

The discoveries in the pre-salt region could eventually lead to a nearly six-fold increase in Brazil’s current proven reserves of 14 billion barrels and transform Brazil into a major crude exporter.

“It’s a wonderful day,” Lula said after Petrobras CEO Jose Sergio Gabrielli presented him with the barrel.

The left-leaning president has pledged to use the expanded oil and gas revenues from the pre-salt fields to improve education and reduce the wide gulf between rich and poor in Brazil.

To that end, legal changes are being contemplated which could lead to current concession contracts being turned into production-sharing agreements with Petrobras, ensuring the government gets a larger share in the profits.

Although the head of state had planned to take advantage of the May Day holiday to travel to the oil field and participate in the start of drilling, bad weather and a lack of security guarantees held him back.

The initial test period is being carried out by the BW “Cidade de Sao Vicente” floating production, storage and offloading vessel, which has a capacity to extract 30,000 barrels per day.

Late next year, Petrobras plans to launch a pilot program at Tupi that will boost daily production to 100,000 barrels and 4 million cubic meters (141 million cubic feet) of natural gas.

Petrobras plans to invest close to $29 billion through 2013 to develop fields in the pre-salt region, with the goal of producing 219,000 bpd in that area by 2011.

The company then plans to increase output in the pre-salt to 1.3 million bpd by 2013 and 1.8 million bpd by 2020, roughly equivalent to Brazil’s daily output from all its domestic fields last summer.

Petrobras, an integrated energy company and the global leader in deepwater oil exploration and production, operates in 27 countries in the Americas, Africa, Asia and Europe.

Shares of Petrobras, Brazil’s largest corporation, trade on the Sao Paulo, New York, Madrid and Buenos Aires stock exchanges, but the Brazilian government retains control through a golden share.

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