Exxon Offering Stake in Offshore Brazil Oil Field

(Dow Jones Newswires), Oct. 5, 2011

ExxonMobil is offering a stake in a block off Brazil in exchange for drilling a well, a move that follows three previous unsuccessful attempts by the oil giant to prove oil can be produced from the area in commercial quantities.

ExxonMobil, the world's largest publicly traded oil company by market value, and its partners Hess and state-run Petroleo Brasileiro, or Petrobras, have agreed to seek a fourth co-venture partner in the BM-S-22 block in the Santos Basin, ExxonMobil spokesman Patrick McGinn said in an email. "We are continuing to plan our next steps on BM-S-22 Block, " he said.

The Texas-based company didn't provide further details about the potential deal. But ExxonMobil is offering a 25% stake in the block in exchange for drilling a well there to test the reservoir's productivity, according to a document announcing the sale released by IndigoPool, Schlumberger's mergers and acquisitions business. IndigoPool is advising ExxonMobil in the offering.

Geologists believe that the BM-S-22 block contains the largest portion of a gigantic structure that also bleeds into the nearby BM-S-8, BM-S-9 and BM-S-21 blocks. The theory was shaken by the failure of ExxonMobil's Guarani prospect to detect hydrocarbons in 2009, while also raising questions about the risks of drilling in the region after a stunning series of offshore successes. Moreover, ExxonMobil wrote off in the fourth quarter of last year the costs of other two wells, which totaled hundreds of millions of dollars.

ExxonMobil and its partners have provided little information about the estimated reserves of the field. But according to the IndigoPool listing, ExxonMobil estimates that the block holds up to 1.5 billion barrels of gross recoverable oil reserves in a layer of the Earth's crust known as the pre-salt, which is a thick canopy of salt that makes it tough to find oil and expensive to drill for it.

ExxonMobil's stake offering demonstrates that the company wants to bring on board a partner with more experience drilling successful wells in the Brazil pre-salt area and reduce the risk of another dry well, says Fadel Gheit, an analyst with Oppenheimer & Co.

ExxonMobil operates the BM-S-22 block and owns a 40% stake in it through its Esso subsidiary. Hess has a 40% interest and Petrobras has a 20% stake.

Bidding for the stake will close on Dec. 9, IndigoPool said.

ExxonMobil said it remains interested in future opportunities in Brazil

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