Petrobras Hits Drilling Snag at Brazil’s Biggest-Ever Oil Find

Petroleo Brasileiro SA redirected a well at its biggest oil discovery after encountering a pressure zone, underscoring the technical challenges facing the producer’s new management team.

The “drilling phase” of the well at the offshore Libra field hasn’t been halted because of the procedure, the Rio de Janeiro-based state-run company said in an e-mailed response to questions Tuesday. A snag caused the company to halt drilling for more than a week, two people with knowledge of the matter said earlier, asking not to be named because the matter isn’t public. Libra is expected to start commercial output in 2020.

While Petrobras expanded output to a record in December at the so-called pre-salt region that holds Brazil’s largest deposits, it has also run into drilling disruptions in the past. In 2010, it abandoned the first well it started at Libra, citing mechanical issues. In 2011, it briefly halted production at the Sapinhoa field in the same region after a pipe ruptured.

The snag shows that the challenges facing Chief Executive Officer Aldemir Bendine extend beyond finance and corruption as he chooses a new management team. The company is deploying the largest fleet of deepwater production vessels in the industry in an effort to boost output and pay down debt. All that as oil trades near six-year lows after an almost 50 percent drop.

The company will be more autonomous under new management and it has the world’s best technical staff, Bendine said in an interview broadcast on TV Globo.

Shares Fall

Petrobras shares fell 3.9 percent to 8.92 reais in Sao Paulo, the lowest since Feb. 2. They’re 39 percent down from a year ago.

Bendine started the job Feb. 6 after former CEO Maria das Gracas Foster and five of her executive managers quit amid difficulties reporting graft-related writedowns.

Petrobras took a 40 percent stake in a 35-year concession for Libra, the largest discovery in Brazil’s history, in a government auction in October 2013. It was the first auction of subsea prospects, known as pre-salt, using a production-sharing model. Petrobras drilled the first well in 2010 on behalf of oil regulator ANP as part of a project to gather data on the region before offering the areas.

Total SA and Royal Dutch Shell Plc each hold a 20 percent stake of the concession while China National Petroleum Corp. and Beijing-based Cnooc Ltd. have 10 percent apiece.

Libra is estimated by Brazil to hold as much as 12 billion barrels of recoverable crude, or 50 percent more than the proven reserves of OPEC member Ecuador. Schahin Petroleo & Gas SA, the owner of the Cerrado drillship Petrobras hired last year to drill two wells at Libra, said in an e-mail it can’t comment on the project because of confidentiality clauses.

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