Brazil's OGX Plans to Drill Oil Blocks with Estimated 4.8B Barrels

RIO DE JANEIRO (Dow Jones Newswires), Feb. 12, 2009

Brazilian oil and gas company OGX Petroleo e Gas Participacoes SA said Thursday that its drilling concession area could contain more than 4.8 billion barrels, the Estado News Agency reported Thursday.

OGX director for Exploration, Paulo Mendonca, said the initial 4.8 billion barrel reserves seen when the company opened up its capital may be exceeded. According to Mendonca, seismic tests made in the exploration blocks have indicated geological formations with good oil-bearing potential.

OGX plans to start drilling in the blocks south of the Campos Basin, offshore Rio de Janeiro State in September.

Production is scheduled to begin in 2011.

Rodolfo Landim, president of OGX, said its oil projects were feasible even with oil at $25 a barrel. He said he believed oil prices would recover to over $70 a barrel by the time Campos Basin blocs came on-stream.

Landim said OGX had a warchest of BRL7.6 billion ($3.32 billion) and does not need to seek any further financing from the market at present.

Part of the warchest could be used for "well selected" acquisitions, Landim said. Around $2 billion will be used for exploration and $1 billion for initial production development, he added.

Landim said OGX would only go to market for finance when it needs to develop production.

Landim said the company plans to contract a combined ship and production platform in order to bring forward production. All the oil will be exported, he said.

"We're a fortunate company," Landim said, as the economic crisis may benefit its business.

"We went to the market at a good time to raise money, we're going to start exploration at a good time (to contract goods and services) and we will start production at a good time," he said.

According to Landim, OGX has been noticing a fall in the sector's costs.

"There were people building platforms to speculate before the crisis. Today, with the reduction of (economic) activity, there's a surplus of these units," said Production Director Reinaldo Belotti.  

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