Petrobras Expects More Oil Finds in Brazil Presalt Area - CFO

RIO DE JANEIRO Mar 4, 2008 (Dow Jones Newswires)

State-run oil company Petroleo Brasileiro SA (PBR), or Petrobras, expects to make more discoveries in Brazil's promising presalt oil province, Chief Financial Officer Almir Barbassa said Tuesday.

"We have every reason to believe that we will still announce great discoveries in that area," Barbassa said during a conference call with investors and analysts on fourth-quarter earnings. "Our expectation is very positive."

In November, the company had estimated its ultradeep Tupi field in the presalt area could contain up to 8 billion barrels of oil equivalent in recoverable reserves.

In January, Petrobras said it made the discovery of a massive gas field in a nearby exploration block that could turn Brazil into a gas exporter.

Petrobras' shares had dropped 3.09% to BRL78.40 ($46.50) in Sao Paulo at 2000 GMT Tuesday. The company said Monday that its fourth-quarter 2007 net profit fell 2.8% to 5.053 billion Brazilian reals ($3.02 billion) from a year ago.

Barbassa cautioned that exploration in the presalt area bears a great financial risk.

Tupi lies at a water depth of more than 2,000 meters, and then a further 5,000 meters below sand, rocks and salt - making exploration challenging and expensive.

Also, exploration rigs for ultradeep oil areas are currently particularly scarce due to the heating up of the international oil industry, Barbassa said. The company expects to receive more rigs in the next three years, he said.

"It's our priority to work in the presalt area. But the challenge is how to use scarce equipment," said Barbassa.

Petrobras already has found oil in other parts of the presalt area, but hasn't yet calculated the possible reserves due to a lack of additional tests.

The company tested a well each in the BM-S-9 and BM-S-10 blocks that lie close to the BM-S-11 block where Tupi is located.

"But we have to drill more wells in those blocks to evaluate reserves in those areas," Eduardo Molinari, coordinator for strategy and portfolio management of exploration and production at Petrobras, said at the same conference call.

The company said in September that tests on the a well at the Carioca field in the BM-S-9 block showed a promising flow of 2,900 barrels of 27 degrees of API oil and 57,000 cubic meters of gas a day.

Petrobras has a 45% operating stake in the block, with BG Group PLC (BRGYY) holding another 30%, and Spanish-Argentine energy company Repsol-YPF SA (REP) holding 25%.

Molinari couldn't say when Petrobras and its partners will drill more wells at Carioca or the BM-S-10 block.

"And of course, there will be other exploration wells in the Tupi area," Molinari added.

The company expects to produce an initial 100,000 barrels of oil a day from Tupi starting in early 2011. After that, it will install larger platforms at Tupi, Barbassa said.

Peak output at Tupi could reach 1 million barrels a day in 2015 to 2020, BG Group Chief Executive Frank Chapman said in February.

Petrobras holds 65% in Tupi, while BG Group owns 25% and Portugal's Galp Energia SGPS SA (GALP.LB) owns 10%.

Before the initial production, Petrobras will produce some oil from Tupi in a test phase, Barbassa said.

"We will install a rig and switch on only one well in order to define the size of the reservoir and what investments are needed," he said.

Barbassa said media reports last month about Tupi having much larger reserves were misleading.

BG also said in February that Tupi holds overall reserves of up to 30 billion barrels. But only about 25% of that is recoverable reserves, Barbassa said. The reports had mixed up recoverable reserves with overall reserves, he said.

In addition to the Santos Basin, Petrobras also is exploring for oil in the presalt area of the Espirito Santo Basin further north off Brazil's coast.

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