Repsol Sees Billions of Recoverable Reserves at Brazil's BM-S-9 Block

MADRID (Dow Jones Newswires), Feb. 11, 2009

Repsol YPF SA said Wednesday that the Santos Basin BM-S-9 oil block in Brazil is estimated to hold recoverable reserves of between 2 billion and 6 billion barrels of oil equivalent, according to preliminary estimates.

The figure was disclosed by Repsol's head of exploration and production, Nemesio Fernandez-Cuesta, at a press conference here.

Repsol has a 25% stake in the block, which is operated by Brazilian state-owned Petroleo Brasileiro SA, or Petrobras, which has a 45% stake. BG Group owns a 30% stake.

Fernandez said the companies expect to have a more precise reserves estimate later this year.

Meanwhile, Petrobras declined to confirm Repsol's estimate. So far, Petrobras has only given estimates for the Tupi and Iara fields in the BM-S-11 block. In November 2007, Petrobras said recoverable reserves at Tupi were between 5 billion and 8 billion BOE. Last year, the company pegged recoverable reserves for Iara at between 3 billion and 4 billion BOE.

The main issue with oil finds in Brazil is the high cost of recovery because they are located in ultra-deep waters and under a salt layer.

To fulfill the investment targets in its strategic plan, Repsol places the medium price of Brent crude at $57 a barrel, much higher than current levels.

The company could revise its investment forecasts if oil prices stay significantly below the $57 level.

Repsol's Fernandez-Cuesta said that oil prices are expected to rise in response to higher demand.

"Prices should increase to $57, as in the strategic plan, or to $60 or $70 a barrel, which would reflect market fundamentals," said Fernandez-Cuesta, adding that if the price stays below estimated levels, the company could revise its plans, as it does "every year."

Separately, Repsol said Wednesday its reserve replacement ratio almost doubled in 2008, rising to 64% last year from 35% in 2007, thanks to the addition of new reserves.

The company said the figure -- the ratio of reserve additions to production -- is expected to reach 100% in 2012.

In the last three years, Repsol has discovered 840 million BOE, seven times the 2008 production, the company said in a presentation. The 2008 production was 960,000 barrels of oil a day.

The company also said that what it has found through exploration "assures the fulfillment of the guidelines set in the strategic plan."

In the last few years, the company has diversified the geographical areas in which it is present, placing more importance in Brazil and the Gulf of Mexico, considered "high potential" areas.

Copyright (c) 2009 Dow Jones & Company, Inc.