Petrobras Increases Production from Caravela Sul

Petrobras reports production flow tests from appraisal well SCS-10 A offshore the southeast coast of Brazil in block BS-3. The original Caravela Sul discovery was made in October 2001, when oil was found in three different reservoir zones in exploration well SCS-10 in depths between 4,761 and 5,126 meters. The well was located some 175 kilometers off the coast of Santa Catarina State, in approximately 200 meters water depth.

Three production tests now performed were planned from three separate reservoir zones in the well. Due to technical problems only two of the production tests were completed.

The first test was performed in the lowest of the three reservoir zones named B3 and flowed approximately 3,000 barrels of oil per day using a 3/8 inch choke. Estimated sustainable production from the whole of sub zone B3 is by Petrobras calculated to minimum 6,000 barrels of oil per day. The oil is light and of a very high quality, similar to the quality of the oil from the Coral field under development only around 15 kilometers to the north. (API of around 43 degrees with very low contents of sulphur and heavy metals).

Sub zone B1 was also attempted tested without successful flows. Only fractions of oil were produced from this flow-test. The low production rates were, according to the operator, due to limited permeability in the reservoir in the area of the well.

Due to technical problems in the well sub zone B2 was not tested. Even though this reservoir zone is well known from many years of production in the Caravela field and from production flow testing elsewhere in the area, the non- operating partners has expressed great disappointment with the operator not being able to perform the planned flow-test.

The operator has, primarily as a result of the production test in sub zone B3, made a preliminary revision of the estimates for recoverable reserves in this Caravela Sul discovery to around 60 million barrels of oil, up from their earlier estimates of around 40 million barrels. In a news release on June 25, 2002 the Company announced the results of an independent reserve report concluding with recoverable proven and probable reserves of 26 million barrels of oil for the Caravela Sul discovery. More exact reserve estimates will be prepared and presented after the completion of an ongoing 3D seismic interpretation of the area and a full evaluation study for the flow-test. An independent reserve report will also be prepared in due course.

Despite the disappointing test result for sub zone B1 and the technical non ability to flow-test sub zone B2, the Company is greatly encouraged by the excellent flow-test from sub zone B3 and the substantial preliminary upgrade of recoverable reserves in Caravela Sul. The Joint Venture will now extend the workprogram with appraising the reserves and considering alternative development solutions. Thus, a second appraisal well is now under planning to be drilled later on this spring.

The Coral field under development is still not in production. This is due to a series of technical problems incurred by the operator in preparation for production start up. All the problems are, according to Petrobras, individually of minor nature, but have taken more time to overcome than anticipated. Again according to the operator, all environmental and governmental licenses to start production from the field have been obtained. Petrobras informs that production start is imminent.

Petrobras is the operator of the Block BS-3 and Naftex subsidiary Coplex Petroleo do Brasil Limitada hold a 27.5% interest.