RIO DE JANEIRO (Dow Jones Newswires), May 5, 2009

Foreign oil companies continue prospecting for crude at Brazilian concessions, including the key BM-S-22 block in the Santos Basin, despite a steep decline in oil prices and daunting costs.

A series of high-profile oil discoveries in the past few years has made Brazil one of the world's most exciting oil frontiers. Last week, state-run energy giant Petroleo Brasileiro SA (PBR), or Petrobras, pumped the first crude from a Santos Basin sub-salt well at the Tupi field.

BM-S-22 is part of a cluster of promising Santos Basin blocks that have yielded several oil discoveries, including the nearby BM-S-11 block's Tupi - the Western Hemisphere's largest oil discovery in 30 years.

But development of the blocks is pricey and complicated. The oil fields are located under 2,000 meters of water and a further 5,000 meters below sand, rocks and a shifting layer of salt.

Nonetheless, drilling continues.

The Brazilian unit of global oil heavyweight ExxonMobil Corp. (XOM) maintained work on a second well at BM-S-22, according to drilling data from Brazil's National Petroleum Agency, or ANP. The 1ESSO3SPS test well, called Azulao, twice tested positive for oil earlier this year.

ExxonMobil's 3ESSO4SPS well, dubbed Guarani, is being drilled by the West Polaris rig. The well is targeting a total depth of 5,404 meters, ANP data showed.

ExxonMobil holds a 40% operating stake in the block. Hess Corp. (HES) also has a 40% share, while Petrobras holds the remaining 20% stake.

Also in the Santos Basin, the local unit of BG Group PLC (BG.LN) completed drilling on one test well in the S-M-508 block and started work on another. BG completed drilling on the 1BG5SPS test well, drilled by the GSF Celtic Sea rig. The well was drilled in 818.3 meters of water to a total depth of 4,650 meters.

Work on a second well, 6BG6PSPS, started Monday, according to the ANP data. The GSF Celtic Sea was drilling the well in 818.3 meters of water, targeting a total depth of 5,715 meters.

BG is lead operator of the block with 40%, while Petrobras holds a 60% stake.

Meanwhile, U.S. major Chevron Corp. (CVX) ramped up efforts to bring its Frade field in the Campos Basin onstream later this year. Drilling on two wells was under way at the field, while a third well was completed, the drilling data showed.

Drilling at Frade was being done via the Noble Leo Segerius rig. Work was completed on the 7FR8HPRJS well, which was drilled in 1,166 meters of water to a total depth of 3,286 meters.

The rig was currently drilling two additional wells at the site as of Monday, the drilling data showed. The 8FR5DRJS well was under way in 1,301 meters of water, targeting a total depth of 2,778 meters. In addition, the 9FR3DRJS prospect was being drilled in 1,183 meters of water to a total depth of 3,466 meters.

Chevron expects the $3 billion Frade field to start production later this year, producing about 270 million barrels over the next 18 years.  

Copyright (c) 2009 Dow Jones & Company, Inc.

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