ANP OKs Petrobras Drilling in Government-Held Subsalt

RIO DE JANEIRO (Dow Jones), Dec. 2, 2009

Brazil's National Petroluem Agency has approved drilling by state-run energy giant Petrobras in a deepwater area currently under government control, the company said Wednesday in a regulatory filing.

In the filing, Petrobras said the ANP had authorized exploration drilling in a contiguous area near the Iara prospect in the Santos Basin. The drilling will be done in areas outside the boundaries of the BM-S-11 block that contains the Iara and Tupi oil finds.

The area could become part of the oil reserves that will be transferred to Petrobras as part of the government's complex capitalization plan for the company, Petrobras said.

Brazil's government plans to cede rights to explore and produce 5 billion barrels of oil in the subsalt region to Petrobras. Petrobras will pay fair-market value for the oil with a share offering.

"The drilling's objective is to obtain information about the region, which still needs more detailed geologic evaluation," Petrobras said.

The company said its SS-53 drilling platform will be moved into the area and drill to depths of 6,425 meters in search of oil reserves.

The area is part of Brazil's so-called subsalt oil province. The subsalt finds were made under a thick layer of salt in the Santos Basin off the coast of Sao Paulo and Rio de Janeiro states. The oil lies under more than 2,000 meters of water and a further 5,000 meters under sand, rock and a shifting layer of salt.

The Iara discovery, estimated to hold recoverable reserves of between 3 billion and 4 billion barrels of oil equivalent, or BOE. Meanwhile, the nearby Tupi field -- also in the BM-S-11 block -- was estimated to hold between 5 billion and 8 billion recoverable BOE. Revealed in November 2007, Tupi was the Western Hemisphere's largest oil discovery in 30 years.

Petrobras locally traded shares were 0.2% higher at 39.85 Brazilian ($23.14) as of 1344 GMT on the Sao Paulo Stock Exchange.  

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