Brazil Says Offshore Oil Field May be Americas' Biggest Find in 34 Years

Brazil said its Libra field may hold “gigantic” reserves of as much as 15 billion barrels, almost twice initial estimates, which would make it the biggest discovery in the Americas in more than three decades.

Oil was found below a layer of salt at the first exploration well at the government’s field, according to an e- mail sent today by the national petroleum regulator, known as ANP. Brazil drilled to a depth of 5,410 meters (3.4 miles) at the well and may reach 6,500 meters by December, the ANP said.

A deposit of 15 billion barrels would be almost twice the size of state-controlled Petroleo Brasileiro SA’s nearby Tupi field, would eclipse Brazil’s total current reserve base and also be the biggest find in the Americas since Mexico discovered Cantarell in 1976. Deepwater fields in Brazil’s so-called pre- salt region have yielded the largest discoveries outside the Middle East in the past decade, said Julius Walker, an oil analyst at the Paris-based International Energy Agency.

“Nobody is making discoveries like these anywhere at the moment,” Walker said in a telephone interview today. It “makes deepwater Brazil the most exciting new area.”

The ANP said today that the field may hold between 3.7 billion to 15 billion barrels and that 7.9 billion barrels is the most likely estimate.

Libra and Tupi

Libra and Tupi, both in Brazil’s Santos Basin, are located in a region known as the pre-salt, which runs 800 kilometers (500 miles) off the coast, holding oil deposits beneath a layer of salt resting as deep as 3,000 meters beneath the ocean surface and another 5,000 meters below the seabed.

Petrobras, which will operate all new concessions in the pre-salt under proposed regulation, raised about $70 billion last month in the world’s biggest share sale to help fund its $224 billion, five-year investment plan, the oil industry’s largest. The Rio de Janeiro-based company said Sept. 1 it agreed to pay $42.5 billion in new stock for 5 billion barrels of undeveloped government reserves.

“Petrobras is blessed because it’s sitting on an amazing piece of real estate,” Michael Purves, Chief Market Strategist at BGC Partners LP, said in a telephone interview from New York. “They have a pre-emptive position to acquire any future reserves off the coast of Brazil.”

Spain’s Repsol YPF SA also has stakes in deepwater blocks in the Santos Basin. OGX Petroleo & Gas Participacoes SA, the Brazilian oil company controlled by billionaire Eike Batista, is exploring shallow waters of the basin.

‘Positive for Everybody’

The Libra discovery is “positive for everybody operating down there,” Eric Conrads, who helps manage about $1 billion in emerging market funds at ING Investment Management in New York, said in a telephone interview. “That’s positive for Petrobras, that’s positive for Repsol, that’s positive for OGX.”

Petrobras rose 3 centavos, or 0.1 percent, to 26.29 reais in Sao Paulo trading at 2:58 p.m. New York time. The stock has plunged 28 percent this year through yesterday, while OGX has gained 27 percent and Repsol rose 5.6 percent.

The Brazilian state-run company may not have the capacity to develop and operate all the pre-salt fields in its business plan, in addition to government reserves such as Libra, Andres Kikuchi, an analyst at Sao Paulo-based Link Investimentos, said in a telephone interview. It will also need to increase debt “a lot” over the next three years to develop the fields, he said. Developing the 5 billion barrels bought from the government will cost about $10 billion to $15 billion, he said.

Government Control

The ANP has said that Brazil’s government plans to keep control of Libra as the South American nation tightens its grip on its reserves. Pre-Sal Petroleo SA, a new state oil company, will own at least 40 percent of Libra, Magda Chambriard, an ANP director, said Sept. 15 in an interview. That’s on top of a minimum 30 percent stake to be held by Petrobras, she said.

Haroldo Lima, the head of the ANP, said yesterday that the field may have 7.9 billion to 16 billion barrels, according to the agency’s press office.

Brazil currently has proven reserves of about 14 billion barrels, the ANP said.

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

• LinkedIn
• Google +1
• Print
• QUEUE