Devon to Spend US$100mn to Start Up Polvo in July

US independent oil company Devon Energy (NYSE: DVN) plans to invest US$100mn to complete development of the offshore Polvo field and start production in July, making company the second foreign offshore oil producer in Brazil, Devon country manager Murilo Marroquim told BNamericas.

Anglo-Dutch giant Shell (NYSE: RDS) is the only other foreign operator to produce oil offshore Brazil.

"This year is very important for Devon," said Marroquim. "Devon is an independent oil company without refineries that lives off exploring, producing and selling oil, so this is the end of the cycle."

Devon has 60% of Polvo and South Korea's SK Corp 40%. Polvo is located in the Campos basin 100km from the Rio de Janeiro coastline at water depths of 300m.

The company has been investing in Brazil since 1998, when it assumed a small stake in an offshore block in the northeastern basin of Barreirinhas.

Beside the BM-C-8 block where Polvo is located, the company has interests in seven other blocks in the Campos, Camamu Almada and Barreirinhas basins, according to Brazil's national hydrocarbons regulator ANP. It is operator in four blocks.

Total investment in Polvo is still estimated at some US$300mn, said Marroquim.

"I will know the real cost when I pay the last bill," he said.

The BM-C-8 block was awarded to Devon in 2000. Although Devon discovered oil there from 200-04, federal oil company Petrobras (NYSE: PBR) had found oil there in 1994.

Polvo, declared commercially feasible in 2005, has estimated reserves of some 50Mb of heavy crude and the plan is to produce for seven years, said Marroquim. Output is expected to peak at 50,000b/d.

The floating production, storage and offloading (FPSO) vessel for Polvo is due to arrive in Brazil in June and will be linked to a fixed platform that is being built at the field for the start of operations.

"Devon will sell the oil to whoever wants to buy it," Marroquim said when asked whether the company plans to export the oil from Brazil.

OTHER PROJETCS

Devon will continue investing in its offshore operations in Brazil with a total budget of US$100mn for this year, the manager said.

The company has committed to drilling in the rest of the BM-C-8 block and other blocks and start analyzing seismic data from its blocks in the Camamu basin.

In November 2008, the company plans to start an exploratory drilling campaign, when it expects the arrival of a deepwater drill ship Devon has leased from US oil services company Transocean (NYSE: RIG) for three years.

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