Petrobras to Drill Sao Francisco Basin in 2008

Brazil's federal energy company Petrobras (NYSE: PBR) plans to start drilling the onshore Sao Francisco basin in 2008, according to Petrobras executive E&P manager Francisco Nepomuceno.

The company is planning to drill two exploration wells in the basin, he said during the Latin America Gas Summit 2006 seminar in Sao Paulo.

The basin has one of oldest geological formations in Brazil. It is located mostly in Minas Gerais state, which is crossed by one of Brazil's largest rivers, the Sao Francicso.

Petrobras, which carried out some exploration there in the 1940s, has never invested heavily in the region, where local populations have reported natural gas bubbling from the river's surface.

However, in 2005 Petrobras and British gas company BG Group (NYSE: BRG) were awarded interests in six Sao Francisco blocks in the seventh hydrocarbons licensing round. Petrobras is operator in all six blocks despite the 50:50 partnership.

Sao Francisco's proximity to consumer markets plus Brazil's rising demand for gas attracted the two companies and another four that were awarded 39 of the 43 blocks offered last year.

Investments in the blocks are estimated at some US$125mn, local press reported.

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