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Petrobras CFO: 1M b/d from Tupi 'Not Out of Reach'

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MADRID (Dow Jones)

A peak oil output of 1 million barrels a day at the ultra-deep Tupi field in Brazil's Santos Basin is "not out of reach," the chief financial officer of state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, said Wednesday.

The field, which is in the promising pre-salt area off Brazil's coast, could reach its peak output as early as five to seven years from now, CFO Almir Barbassa said. He spoke at the annual conference of the Latibex exchange of Latin American companies traded in Madrid.

Barbassa said it's too early to tell exactly what Tupi's peak output will be and when it will be reached. Currently, the company is able to make only rough estimates and cannot give exact production targets for the field, he said.

Petrobras' shares were down 0.92% to 76.59 Brazilian reals ($42.96) at 1704 GMT in Sao Paulo. Its shares earlier Wednesday had fallen as low as BRL75.51 after the company announced a decline in its October production.

Petrobras said Oct. 8 it estimates oil and gas reserves at Tupi at between 5 billion and 8 billion barrels of oil equivalent, or BOE, making it Brazil's largest ever discovery.

The latest discovery lies a considerable seven kilometers below sea level: the water depth is around 2,000 meters, followed by 3,000 meters of rock and sand below the seabed, and then a further 2,000 meters through a layer of salt.

Petrobras Chief Executive Sergio Gabrielli said further discoveries in the pre-salt layer could place Brazil among the eight countries with the largest oil reserves in the world.

Gabrielli last week also said that Tupi production will "very likely" top 200,000 BOE a day. Pilot production at the field may start in 2010-2011 at around 100,000 BOE a day.

Wood Mackenzie analyst Matthew Shaw recently also said production at Tupi could peak at around 1 million barrels, but expects the field's output to peak only by 2022.

He calls Tupi "one of the most significant oil discoveries in the last 20 years," only surpassed by the 12.9-billion-barrel Kashagan field found in Kazakhstan in 2000.

Petrobras is Tupi's leading field operator with a 65% stake, and U.K. energy company BG Group PLC (BRGYY) holds another 25% of the field. The remaining 10% stake is controlled by Portugal's Galp Energia SGPS SA (GALP.LB).

Brazil will discuss whether it should join the Organization of Petroleum Exporting Countries after it has gauged the impact on its oil exports from Tupi, Isnard Penha Brasil, Brazil's ambassador to Saudi Arabia, said in Riyadh Friday.

Copyright (c) 2007 Dow Jones & Company, Inc.

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