BG Group's Brazil Unit to Invest $10B over 10 Years - Report

RIO DE JANEIRO(Dow Jones Newswires), Jan. 24, 2011

BG Group will invest $10 billion over the next 10 years in Brazil, aiming to be the Latin American country's second-largest oil producer, BG Brasil President Nelson Silva told local business daily Valor Economic in Monday's edition.

BG is aiming for output of 400 million barrels of oil equivalent, or BOE, by 2020, according to the report. A large slice of that production will come from fields where BG is partnered with Brazilian state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras.

"BG is here to stay," Silva told Valor. "We want to be operators and have a sustainable project here in Brazil." BG's press office confirmed Silva's comments.

The investment mark BG's participation in the accelerating development of ultra-deepwater oil fields discovered off Brazil's southeast coast, and are double the $5 billion BG has invested over the past 16 years.

In addition to BG's about $1 billion price tag for building 13 floating production, storage and offloading vessels, or FPSOs, the company must also build a storage area for its share of crude oil from the fields, Silva told Valor.

"We have to decide soon our long-term cost structure," Silva said. The executive expects the company to make a decision on a crude oil storage site in 2011. BG will also invest $1.5 billion on a research and development center, fulfilling a requirement by Brazil's government to earmark 1% of gross revenue from high-output oil fields in R&D.

BG holds a 25% stake of the BM-S-11 block that contains Lula and Cernambi, two fields that were declared commercially viable at the end of 2010. Petrobras pegged recoverable reserves at 8.3 billion BOE for the two fields.

In addition, BG has a 30% stake in the BM-S-9 block that contains the Guara field, as well as a 25% stake in the BM-S-10 block holding the Parati discovery. The blocks are all part of the so-called presalt cluster, an area that has been estimated to hold as much as 50 billion barrels of oil--and perhaps more.

The presalt fields were made under a thick layer of salt in the Santos Basin off the coast of Sao Paulo and Rio de Janeiro states. The oil lies under more than 2 kilometers of water and a further 5 kilometers below sand, rock and a shifting layer of salt.

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