Brazil Energy Minister: 'Subsalt Oil Production to Cost $40-$50/Barrel'

RIO DE JANEIRO (Dow Jones Newswires), October 10, 2008

The cost to produce crude oil from Brazil's promising subsalt deposits will run between $40 and $50 a barrel at current conditions, Mines and Energy Minister Edison Lobao said Friday.

"When you drill a well, there is a risk you won't find oil. In (Brazil's) subsalt region, there isn't this risk," the local Estado news agency quoted Lobao as saying at a meeting in Lisbon. "And the oil is flowing generously."

Officials at state-run energy giant Petrobras had previously said development of the company's oil reserves -- including the subsalt region -- was viable at an oil price of $35 a barrel, although executives have since backed off the statements in recent months. International oil prices have plummeted in recent weeks on expectations of slack demand amid a global economic slowdown.

Earlier Friday, light sweet crude for November delivery slid below $80 a barrel in trading on the New York Mercantile Exchange.

Petrobras has so far announced reserve estimates for two fields in the Santos Basin portion of the subsalt area. In the BM-S-11 block, recoverable reserves at the Tupi field was pegged at between 5 billion and 8 billion barrels of oil equivalent. Meanwhile, the Iara field, in a separate portion of the same block, was estimated to hold recoverable reserves of between 3 billion and 4 billion BOE.

Furthermore, the company has disclosed oil discoveries at several other nearby blocks, but has not yet released reserve estimates.

Lobao called the string of discoveries in the subsalt layer, which extends from Espirito Santo state in the north to Santa Catarina state in the south, a "miracle."

"It's practically impossible to drill a well in the subsalt region and not find oil," Lobao said.

Copyright (c) 2008 Dow Jones & Company, Inc.

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