Bloomberg News

Petrobras Says Brazil Oil Reserves Similar Size to North Sea

July 14, 2011

(Updates with comment from Petrobras executive starting in second paragraph.)

July 14 (Bloomberg) -- Brazil’s oil reserves, including recent discoveries in deep waters of the Atlantic Ocean, are of a similar size to those found in the North Sea, said an exploration official at Petroleo Brasileiro SA.

The U.K. and Norway held about 62 billion barrels of reserves in the North Sea before the deposits were developed, Francisco Nepomuceno Filho, Petrobras’s London head of exploration and production, said in an interview in London today.

“Brazil as a whole could have a potential of the same size of the North Sea, including Norway and the U.K.,” Nepomuceno said. “Those two countries grew a lot and had huge development.”

Brazilian reserves that sit miles below the floor of the Atlantic Ocean trapped under layers of rock and salt hold an estimated 50 billion barrels of oil, according to the country’s oil regulator. Lula, the largest discovery in the Americas in over three decades, had the country’s most productive well in May, yielding 36,322 barrels a day of oil and natural gas.

Petrobras, based in Rio de Janeiro, is also preparing to test a recent discovery well in the offshore Sergipe Basin in northeastern Brazil, an area that may be a “new oil province,” Nepomuceno said. Petrobras will reach its target of 2.1 million barrels a day of average oil production in Brazil for this year, he said.

Investment Plan

The North Sea reached peak production of 6 million barrels a day in 1999, Nepomuceno said. Petrobras plans to triple production to 6 million barrels a day by 2020, including output from deep-water reserves where Petrobras bought production rights from the government last year.

Petrobras is revising its $224 billion, five-year investment plan and the company’s board may approve it on July 22, Nepomuceno said, without providing details of the plan.

Rising output rates in the pre-salt area are reducing costs because the company can supply each production platform with fewer wells, Nepomuceno said. Each pre-salt well costs about $100 million dollars to drill in Brazil. Improved productivity will help compensate for the larger exploration area Petrobras needs to tackle under its new plan, he said.

“It’s possible for investments to remain similar,” he said.

Cost Cuts

Petrobras’s government-controlled board has rejected two proposals for the 2011-2015 business plan. Finance Minister Guido Mantega, who represents the government on the board, said June 20 that Petrobras needed to “cut costs” from the proposed plan.

It will be “extremely difficult” for Petrobras to raise the funds to meet its investment goals, Simon Nocera, co-founder of San Francisco-based hedge fund Lumen Advisors LLC and a former economist at the International Monetary Fund, said at the Bloomberg Brazil Conference today in New York.

Petrobras is seeking to borrow about $47 billion by 2014 to finance investments and refinance existing debt, Chief Financial Officer Almir Barbassa said June 27.

--Editors: Carlos Caminada, Robin Saponar

--With assistance from Karen Eeuwens in London. Editors: Carlos Caminada, Robin Saponar

To contact the reporters on this story: Laura Price in London at lprice3@bloomberg.net; Peter Millard in Rio De Janeiro at pmillard1@bloomberg.net

To contact the editor responsible for this story: Jessica Brice at jbrice1@bloomberg.net


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