Shell to Drill Exploration Well at New Brazil Field in 2007

Campos and Santos Basin
(Click to Enlarge)
RIO DE JANEIRO Sep 12, 2006 (Dow Jones Newswires)

Royal Dutch Shell (RDSB.LN) next year will drill a first exploration well at the BMS-31 block in Brazil's Santos Basin off the coast of Sao Paulo state, John P. Haney, the vice president of exploration and production at Shell's Brazilian unit, said Monday.

Shell has a 60% stake and is lead operator in the offshore block, while Danish firm Maersk holds another 40%. The BMS-31 is one of 13 Brazilian offshore exploration blocks in which Shell has a participation. The company is already performing seismic studies in the blocks.

In October, Shell will also perform another drilling at its BS-4 stake, also in the Santos Basin, Haney said. The company needs to decide by year-end, whether it will declare the BS-4 commercially viable or return the block to Brazil's National Petroleum Agency, or ANP.

Haney declined to say whether the company is inclined to declare the block commercially viable or not. Shell holds a 40% operating stake in the BS-4, while Brazil's state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, holds another 40%, and Chevron Corp. (CVX) 20%. The block has estimated reserves of 300 million barrels of very heavy crude.

Shell also has a 50% operating stake in the BC-10 block, which was declared commercial in December 2005, after a substantial exploration and appraisal program involving 13 wells and significant engineering and technological studies. In total, six discoveries were made in the block, which resulted in four development areas.

The block is located in water depths ranging from 1,500 to 2,000 meters about 120 kilometers southeast of the city of Vitoria in Brazil's Espirito Santo state, just north of Rio de Janeiro state.

It has a potential to produce about 100,000 barrels of oil a day. The block has an estimated 400 million barrels of oil reserves, Shell had earlier said. Crude found at the block has a density of between 17 to 24 degrees of API, Shell had previously said.

First oil production at the BC-10 block could start in late 2007 or early 2008, a Shell press official said in March, but Haney Monday didn't go beyond saying that production there "will start in this decade."

Shell until recently was the only foreign firm producing oil in Brazil. It currently pumps some 30,000 b/d from the Bijupira and Salema oil fields in the Campos Basin. Spanish-Argentine oil firm Repsol-YPF (REP) in April became the second foreign firm to produce oil in the country and now pumps 8,000 b/d from the Albacora Leste field, where it has a 10% participation. Brazil's state-run oil firm Petrobras, holds the other 90% in the field and is its lead operator.

Copyright (c) 2006 Dow Jones & Company, Inc.

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