Wednesday, April 16, 2008

Brazil's Gusher Of Oil

In Brazil, Another Gusher (by Joshua Schneyer)
If its size is confirmed, a vast new oil find would catapult Brazil into the world's oil-producing elite. But extraction will be difficult.

Among energy investors, they are becoming known as Brazilian bombshells: a barrage of announcements about oil and gas discoveries—some confirmed, others speculative, and each more spectacular than the one before. Together, they suggest that Brazil could be on the cusp of transformation, from a once energy-poor developing nation into a major oil exporter.
The latest of the announcements came Monday, when the head of ANP, Brazil's government oil regulator, revealed "unofficial" figures from a new reservoir, known as Carioca, which may hold 33 billion barrels of oil and gas. If confirmed, it would be the world's largest discovery in at least 32 years. Carioca, which is located in the Santos Basin, 170 miles from shore underneath 2,000 meters of water, would follow on the November mega-discovery by state oil company Petrobras (PBR) of the offshore Tupi field, with its already confirmed reserves of 5 billion to 8 billion barrels, and a later discovery known as Jupiter, a natural gas area that Petrobras says is as big as Tupi and perhaps even more important for gas-hungry Brazil.

Unconfirmed Estimates
If confirmed, a 33-billion-barrels find would trail just two larger oil reservoirs, in Saudi Arabia and Kuwait. Those fields were each discovered more than 60 years ago, but together still account for nearly 8% of global oil output. With a single field, Brazil could potentially top all the proved reserves in the United States, estimated at 29.9 billion barrels, according to BP's 2007 Statistical Review of World Energy. Mexico's 35-billion-barrel Cantarell field, discovered in 1976, was largely responsible for that country becoming the world's fifth-largest oil producer.
"Carioca would be the third-largest oil field in the world," said Haroldo Lima, director of ANP, at an energy seminar Monday.
But, unsurprisingly for the oil business, which is fueled by industry rumor, the facts about the Carioca discovery are, at best, hard to pin down.
Start with the report itself. Lima claimed he got the 33-billion-barrel estimate for Carioca "in a nonofficial way, through back channels, but from people at the company (Petrobras)." On Tuesday, Brazil's securities regulator, CVM, chided Lima for a potential leak of insider information. Lima claimed the Carioca figures had also appeared elsewhere, including in magazines, making them public domain.

More Recoverable?
Typical for Petrobras, which often initially downplays discoveries but has sometimes leaked discovery data, the company said that Lima's estimate was premature and further drilling was needed to quantify Carioca reserves. "We've got a discovery, but more work is needed before we have a full account of reserves," said Jorge Zelada, Petrobras international director, at a breakfast Tuesday. Just two months ago, Spain's Repsol YPF (REP), a 25% partner in the Carioca discovery, released a far more tempered assessment, saying it expected Carioca contained "at least 500 million barrels."
Lima hinted Monday that Carioca's alleged 33 billion barrels were all recoverable reserves, saying Carioca appeared five times larger than Tupi (which itself holds between 5 billion and 8 billion recoverable barrels). The distinction would be vital, since in most offshore reservoirs only around a third of oil is recoverable.
But analyst reports, including from Citibank (C), largely dismissed the idea, saying Brazil's Carioca field would then top even the largest Saudi reservoir in terms of total oil. Experts said even a figure of 10 billion recoverable barrels at Carioca would be remarkable. Combined with the other recent discoveries, it could vault Brazil, which currently has proved reserves of 12 billion barrels, into the world's oil elite, perhaps between Nigeria (36 billion) and Venezuela (80 billion).

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