Brazil reveals giant oil find!

(Jon Harding, National Post) Calgary, Canada – A massive light oil and natural gas discovery in offshore Brazil’s Santos Basin, shows big pools of oil remain in the world as long as companies drill deep, technically-challenging and expensive wells to seek them out.

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, said a recently-drilled sidetrack well confirmed an extension hundreds of kilometers long off its Tupi field, which the company said may hold as many as eight-billion barrels of recoverable oil and natural gas.

Petroleo Brasileiro is the operator with a 65% stake in the discovery, while partners are London-based BG Group with 25% and Lisbon, Portugal-based Galp Energia with 10%.

The Tupi Sui appraisal well, drilled about 10 kilometres south of an original find, which BG said in February showed resource in place of between 1.5-billion barrels and 10-billion of oil equivalent, confirmed a field that is 800 kilometres long and about 200 kilometres wide.

By comparison, offshore Newfoundland and Labrador’s Hibernia oil field, Canada’s largest offshore project by production, has total reserves of 1.2 billion barrels.

“You think in terms of the average oil pool in Alberta being five-kilometres by 2.6-kilometres and this is massive,” said Chris Theal, head of research at Calgary-based Tristone Capital Inc. “It shows if the industry goes deeper and into more technically complex formations, the larger prizes are there. This is ultra-deep water – 1,500 metres to 3,000 metres – and then another 3,000 metres to 4,000 metres below the sea floor.”

Tupi’s total estimate would almost match that of Norway’s 8.5 billion barrels of proved oil reserves, according to an estimate by BP Plc.

Brazil has 13 billion barrels of oil and natural-gas equivalent of proved reserves, according to Petrobras, based in Rio de Janeiro.

The oil at Tupi, located in the offshore Santos Basin, is a light grade, 28 API, which is more valuable and cheaper to refine than the heavy crude that dominates Brazilian output.

The Tupi field would be three quarters the size of Kazakhstan’s Kashagan field, the world’s largest oil discovery in the past 30 years.

Kashagan, which is offshore in the Caspian Sea, held 12 billion barrels of recoverable crude when it was uncorked in 2000. Petrobras said the Tupi oil lies beneath an existing offshore oilfield under a layer of salt. It said its first well into the formation took one year to drill at a cost US$240-million, but knowledge of the formation and drilling advancements mean wells can now be drilled in 60 days for about US$60-million.

Calgary-based EnCana Corp. owned a 50% interest in a discovery in another offshore Brazil basin but sold it in 2005 to Norsk Hydro ASA of Norway for about US$350-million.

EnCana this year sold rights to 10 exploration blocks offshore Brazil, including some in the Santos Basin, to a pair of Indian firms for US$165-million.

Financial Post

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