BG: To Start Drilling on Brazil E&P Block Next Week

RIO DE JANEIRO Dec 05 2005 (Dow Jones Commodities News Select via Comtex) By Bernd Radowitz, Dow Jones Newswires

BG Group PLC (BRG), or British Gas, next week will start drilling on the BMS-13 exploration block in the Santos Basin off the coast of Sao Paulo state, said Jose Ponte, BG's director for corporate affairs in the Southern Cone.

He spoke at the sidelines of an energy seminar in Rio de Janeiro.

Ponte gave no details about how much the company will invest in the drilling of the block, in which the company is operator. In another nearby block, the BMS-13, BG Group and Brazil's state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, already started drilling earlier this year. Petrobras is operator in that block, as well as in two others where BG and Petrobras still want to start drilling this year, Ponte said.

BG still has no oil or gas production in Brazil, but now holds stakes in 14 Brazilian exploration blocks, of which eight are in the Santos Basin and six in the Sao Francisco river basin.

BG Group in October reportedly pledged to invest $250 million in 10 new exploration blocks it won in joint bids with Petrobras and Spanish energy company Repsol-YPF SA (REP) in a government auction for new exploration and production blocks.

The company spent $130 million to buy a participation in the 10 new blocks during the auction. Among the 10 new blocks are two BG Group won as operator in a consortium, in which it and Repsol-YPF each hold a 50% stake, in shallow waters in the Santos Basin. Those blocks were auctioned for a combined price of 168 million reals ($74 million) and are close to the Merluza field, where Royal Dutch Shell PLC (RDSB.LN) currently produces about 1 million cubic meters of natural gas a day.

BG Group also has a 40% stake in a deep water block in the Santos Basin, with Petrobras holding the other 60% as lead operator. That was the most expensive block during the auction. The two companies have to pay Brazil's government BRL160 million for the block close to the Mexilhao field, where Petrobras plans to produce 12 million cubic meters of natural gas per day starting in 2008. Petrobras is the lead operator in that block with a 60% stake.

(C) 2005 FWN Select. All Rights Reserved

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