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  HOME | Main headline

Non-OPEC Brazil to Have World's 8th-Largest Crude Reserves
Massive oil finds off Brazil’s southeastern coast will catapult the country into eighth place worldwide in terms of crude reserves, as Repsol YPF begins drilling.

RIO DE JANEIRO – Massive oil finds off Brazil’s southeastern coast will catapult the country into eighth place worldwide in terms of crude reserves, the head of state-owned Energy Research Corporation, or EPE, said Thursday.

“By our expectations, and using the most conservative estimates possible, we can say that Brazil will occupy eighth place worldwide in proven oil reserves, although it could rank even higher,” EPE chief Mauricio Tomalsquim told foreign correspondents.

Brazil currently has 14 billion barrels of proven reserves, but that total could rise to 80 billion just with the “pre-salt” areas already under concession.

The pre-salt oil frontier, which encompasses an 800-kilometer (500-mile) by 200-kilometer area off the coast of Sao Paulo and Rio de Janeiro states, is so-named because it lies far beneath the ocean floor under layers of rock and an unstable salt formation.

Tomalsquim, part of the commission that drew up a draft legal framework – announced this week – for the new reserves, said that practically all the new oil will be exported because Brazil is already energy self-sufficient and plans to maintain its current energy mix, 46 percent of which is based on renewable sources.

“Brazil in five years will be exporting close to a million barrels of oil a day, just with what will be extracted from the concessions already granted. There’s no doubt it will be one of the major world exporters,” the EPE president said.

The commission took that into account in preparing the legal framework for the pre-salt fields, since Brazil is determined to avoid the so-called “oil curse.”

That expression refers to countries that, despite being large oil exporters, have practically no other industry and have become dependent on crude for their economic wellbeing.

“The legal framework has been conceived to administer the huge influx of funds that will arrive ... The intention is to capitalize on this wealth and avoid the problems other countries with the same type of wealth have had,” Tomalsquim said.

The proposed new laws will promote industrialization because they require that most of the equipment needed to exploit the pre-salt cluster – such as platforms and drilling rigs – be manufactured in Brazil.

“We’re going to mete out bidding processes in accord with Brazilian industry’s ability to meet that demand,” he said.

The draft framework, which will govern 71 percent of the pre-salt areas, or those that have not yet been awarded in concession, makes the state owner of the reserves and allows the government to contract foreign oil companies to act as service providers.

Under President Luiz Inacio Lula da Silva’s plan, which must be approved by Congress, new reserves are to be exploited under a shared-production regime that makes Petrobras the exclusive operator and guarantees the firm a stake of at least 30 percent in every contract awarded to private firms.

Tomalsquim added that, despite the central role played by the state and Petrobras, the terms of the government proposal will still be attractive and profitable for global oil firms and said that without their contribution “it will be difficult to undertake the necessary investment.”

The EPE chief said the new model will be especially appealing to small- and medium-sized foreign oil companies interested in teaming up with Petrobras, noting that they will be able to benefit from the Brazilian company’s expertise in deep-water drilling.

“But the pre-salt also will attract the attention of the large global oil firms that want access to increasingly scarce reserves with low investment risk,” he said.

Tomalsquim said Petrobras has had success at 87 percent of 31 wells it has drilled in the pre-salt, compared with a normal success rate in oil operations of between 10 percent and 20 percent.

But extracting the oil and gas will be a challenge, given that the pre-salt deposits lie at a depth of up to 7 kilometers (4.3 miles) below the ocean surface, and Lula acknowledged Monday that the effort will require spending some $210 billion over the next decade.

The president said his proposal for the pre-salt deposits is meant to “ensure that the best part of the income generated remains in the hands of the Brazilian people.”

His plan calls for the government’s income from the expected bonanza will go into a special fund to finance investment in education, science and technology, environmental protection and alleviating poverty.


Repsol YPF Begins Drilling


Meanwhile, Spain’s Repsol YPF announced Wednesday it will install a drilling platform to capitalize on the potential of the deepwater Guara field, off the coast of the Brazilian state of Sao Paulo, saying its aim is to produce 120,000 barrels of oil equivalent per day.

Repsol YPF and its partners – Brazilian state-controlled Petrobras and BG Group – hailed the “very high productivity” of Guara, which is located in the offshore Santos basin and is estimated to contain recoverable volumes of between 1.1 billion and 2 billion barrels of high-quality light crude and natural gas reserves.

Repsol YPF announced its decision to install the Floating Production, Storage and Offloading vessel in a statement to Spanish securities regulators.

Guara will become the second operating field in the Santos basin, according to Repsol, which has a 25 percent stake in the sub-salt BM-S-9 block, where Guara is located.

The pre-salt oil frontier, which encompasses an 800-kilometer (500-mile) by 200-kilometer area off the coast of Sao Paulo and Rio de Janeiro states, is so-named because it lies far beneath the ocean floor under layers of rock and an unstable salt formation.

Brazil currently has 14 billion barrels of proven reserves, but that total could rise to 80 billion just with the “pre-salt” areas already under concession.

Repsol YPF CEO Antonio Brufau told Radio Intereconomia that oil production at Guara should begin within the next two or three years.

Brufau hailed Brazil as a stable environment for investors and said the new legal framework being drawn up by President Luiz Inacio Lula da Silva’s government to exploit massive offshore, pre-salt reserves will not affect fields already tendered.

“Our current situation is inalterable,” Brufau said with respect to the BM-S-9 block, which is located some 300 kilometers (186 miles) off the coast of Sao Paulo state and adjacent to the Carioca field and Tupi well.

According to Repsol, that new framework will “regulate the conditions applicable in the tenders that are carried out after the law comes into effect following approval by the authorities.”

Lula says a week ago that his proposal for the pre-salt deposits is meant to “ensure that the best part of the income generated remains in the hands of the Brazilian people.”

His plan calls for the government’s income from the expected bonanza will go into a special fund to finance investment in education, science and technology, environmental protection and alleviating poverty.

Repsol said technicians confirmed during initial production tests that each well in Guara – whose discovery was announced in June 2008 – could potentially produce tens of thousands of barrels per day.

The consortium that is carrying out exploration work – made up of Petrobras, the operator with 45 percent; BG Group, with 30 percent; and Repsol YPF, with 25 percent – also has plans to drill a new well to allow a more exact evaluation of the area, Repsol said in the statement.

The “recent discovery of hydrocarbons traces in the Vampira well, and the discoveries made in the first half of the year in Panoramix, Piracuca and Iguazu followed from the finds made in the Carioca and Guara fields to consolidate Brazil’s offshore as one of the world’s largest source of new hydrocarbons reserves,” Repsol said.

This year, Repsol has reported 12 oil and gas discoveries, some of which were some of the biggest finds worldwide. In 2008, Repsol took part in three of the world’s five largest discoveries.

Repsol is the international oil company with the most exploration rights in the offshore Santos, Campos and Espiritu Santo basins, with 21 exploration blocks, 11 of which are operated by Repsol.


 

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