Petrobras' Subsalt Development Viable with Oil At $50/Bbl

Fields and Basins of Brazil
(Click to Enlarge)

RIO DE JANEIRO (Dow Jones Newswires), October 27, 2008

Brazilian state-run energy company Petroleo Brasileiro can develop its promising subsalt oil reserves at current oil prices, the company's downstream director told financial daily Valor Economico on Monday.

"I can guarantee that our subsalt is viable (with oil prices) at $60. It's also viable at $50," Petrobras downstream director Paulo Roberto Costa said.

The steep decline in international oil prices and ongoing turmoil in global financial markets caused Petrobras to delay the release of its latest strategic plan, which is expected to include subsalt development.

The current strategic plan, which covers 2008-2012, forecast investments of $112 billion. Since the release of that plan last year, Petrobras has announced plans to build new refineries and several subsalt oil finds in the Santos Basin.

Earlier this year, Petrobras officials confirmed that the company's plans forecast oil prices at $35 a barrel. Oil prices peaked in July at a record $147 a barrel and have tumbled to slightly more than $65 a barrel Monday.

Petrobras' Costa told Valor that the current slide in international oil prices is not sustainable.

"What's going to happen with oil prices going forward is that they're not going to remain low," Costa said.

Costa said the recent decision by OPEC producers to cut crude production by 1.5 million barrels a day and natural decline of 10% annually in output at mature fields will leave the market in short supply.

If global oil demand were to remain stagnant, it would take new production of 8.5 million barrels a day to meet current demand, Costa said.

Petrobras expects to boost daily crude oil and natural gas production to 3.494 million barrels of oil equivalent, or BOE, by 2012. The company also forecasts output of 4.153 million BOE a day by 2015. 

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


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