Brazil discovers vast new oil reserves

AFP | Nov 8, 2007

RIO DE JANEIRO (AFP) – Brazil has discovered huge new petroleum reserves in its south that could turn the country into one of the biggest oil producers in the world, the government and its state-controlled oil company announced Thursday.

If one of the deposits turns out to be as vast as it appears, Brazil will be in the same league “as the Arab countries, Venezuela and others,” the senior minister in charge of the cabinet, Dilma Rousseff, said.

Petrobras, Brazil’s national oil company, said in a statement that exploration of its Tupi field, offshore Sao Paulo state, revealed it could produce up to eight billion barrels of light oil and natural gas.

It said that find, along with another potential field still being explored farther south, could propel Brazil “among the countries with the biggest oil and gas reserves in the world.”

The head of Petrobras, Jose Sergio Gabrielli, told a media conference in Rio de Janeiro that Brazil’s total reserves could now place it “between Nigeria and Venezuela.”

Shares in the company soared on the news, closing 14.57 percent higher at 93.40 reais on the Sao Paulo stockmarket.

Petrobras’s previous stated reserves, given at the end of 2006, were the equivalent of 11.46 billion barrels of oil.

The Tupi find alone could boost that by 50 percent.

Petrobras operates the Tupi area, of which it holds 65 percent. British energy group BG holds a 25 percent share in the field and Portugal’s Petrogal-Galp Energia holds 10 percent.

Petrobras also holds the lion’s share of interest in the other field being tested.

The Brazilian government said no more parts of the new field would be licensed out until a full evaluation was in. It said this was in “the public interest.”

The discoveries are a significant fillip for Brazil, coming at a time that the price of oil is sitting at a record high and heading towards 100 dollars per barrel.

An analyst at the Brazilian Center for Infrastructure, Adriano Pires, agreed that “this is good news.”

But he noted that the Tupi field, 250 kilometres (155 miles) offshore, lies in very deep water, which will make extraction “very expensive.”

At best, he said, production would begin in around four or five years’ time

“It’s only viable if oil prices stay high,” he said.

The Brazilian state holds a 55.7 percent of the shares with voting rights in Petrobras, giving it effective control of the energy giant, which currently pumps out nearly two million barrels of oil a day.

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