Karoon Gas Faces Setback as Brazil Well Doesn't Yield Oil

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SYDNEY - Karoon Gas Australia Ltd. faced a setback to its exploration offshore Brazil after a well in the Santos basin didn't unearth any significant oil reserves.

Despite early signs of oil in the Emu-1 well, drilled to a depth of 4,381 meters in a joint venture with Pacific Rubiales Energy Corp., further testing indicated its main reservoirs contained water instead of oil, Karoon said in a statement Monday.

"There is evidence that there may be some thin sand sections that may contain hydrocarbons, (and) sampling and analysis of these sands is continuing," Karoon said.

Emu-1 is the second well in the Brazilian exploration campaign. The first, Kangaroo-1, discovered oil and Karoon wants to drill another well, Kangaroo-2, nearby to assess that discovery. The joint venture also plans to drill another well, Bilby-1, in the Santos basin later this year.

Copyright (c) 2012 Dow Jones & Company, Inc.

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