2008 : First pre-salt discoveries in Brazil

Deep under the Atlantic Ocean, Brazil’s state-controlled Petroleo Brasileiro SA (Petrobras) has made what could prove to be the largest oil discovery in 30 years, and one that would propel the already prospering country into the major league oil exporters.

The head of Brazil’s upstream regulatory body National Petroleum and Biofuels Agency (ANP), Haroldo Lima, said in April 2008 that the find in Carioca exploration area could countain 33 BBOE*, which would make it the world’s fourth-largest field. Lima didn’t say whether his unofficial estimate was of recoverable reserves or in-place resources. For context, current Brazilian crude oil proven reserves are at 14.4 Bbbl.

The deepwater discovery, coming after a similar find announced last year by Petrobras, suggests that the world still has major pools of oil to be found. For Brazilian analysts, it also casts new doubts on peak oil theory, which postulates that world oil demand will soon outpace supply.

According to David Riedel, oil analyst for Riedel Research Inc., uncertainty remains regarding the size of the Carioca discovery on BM-S-9 block, which lays under 2 km of water, plus many more kilometers of sand, hard rock and another 2 km of salt. The exploration area, also called Carioca-Sugar Loaf, is 275 km off the coast of Sao Paulo and Rio de Janeiro. Carioca remained hidden from explorers until recently because energy companies lacked the technology to assess prospects obscured by undersea salt formations. Salt is difficult for geologists because it absorbs seismic energy and does not yield typical vizualisation results. Also, a decade ago the technology didn’t exist to drill to these depths in this much water. With the discovery of Tupi two years ago in block BM-S-11 in pre-salt sequences, the significance of petroleum exploration in the Brazil offshore basins changed completely. The Carioca field is 45% controlled by Petrobras. DCC Plc’s British Gas LP Gas Ltd. holds a 30% stake and Repsol controls 25%.

Carioca’s possible 33 Bbbl of oil is enough to supply every refinery in the US for six years, making the fourth-largest oil field ever discovered. In fact, only Saudi Arabia’s Ghawar (88 Bbbl), Kuwait’s Burgan (72 Bbbl) and Majnoon (50 Bbbl) discovered by Petrobras in Iraq in 1975 are bigger.

Besides affirming that there is no technical barrier to explore under the salt layer, Guilherme Estrella, Petrobras E&P director, argues that there must be change in the sector’s regulations because the pre-salt exploration can be seen as low risk exploration activity. According to Petrobras, the discovery of the blockbuster natural gas and condensate field in the Jupiler* area in the Santos basin reinforces the notion that there is practically no exploratory risk in the pre-salt layer.

Brazil’s offshore has become one of the hottest development regions in the global oil business, rivaling the offshore area of West Africa, with which it shares similar geology. As a result, the country is poised to challenge Venezuela as Latin America’s major oil exporter. If confirmed, the Carioca-Sugar Loaf find would vault Brazil into the Top 10 countries for oil reserves, ahead of Organization of Petroleum Exporting Countries (OPEC) such as Nigeria and Libya. It also would surpass the US, point out oil analysts.

International oil and gas companies are returning to Brazil for their first major effort since 1953, after being effectively excluded during four decades by the country’s old nationalist and protectionist policies, with Petrobras having upstream monopoly. Since the opening of the sector ruled by the 1997 Petroleum Law, Brazil has discarded tariffs and protectionist quotas, enabling American companies to conquer about half the oil-service market. According to Bloomberg data, Petrobras is the fourth-most valuable company in the Western Hemisphere, behind Exxon Mobil Corp., General Electric Co., and Microsoft Corp.

* BBOE: Billions of Barrels of Oil Equivalent

* Bbbl: Billions of Barrels

* The Jupiler light oil/gas field was discovered by the 1-RJS-652 well 38 km to the East of Tupi oil field. Jupiler may be the biggest gas and condensate discovery ever made in the Brazilian basins and is of strategic importance because Brazil imports around 50% of its natural gas from politically unstable Bolivia which has been nationalizing its hydrocarbon sector

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