Tupi area presalt oil finds likely contiguous

Oil discoveries in the presalt layer off Brazil, triggered by last year's Tupi find, are likely to be contiguous, according to a Brazilian oil company expert.

Aug 14th, 2008

Eric Watkins
Senior Correspondent

LOS ANGELES, Aug. 14 -- Oil discoveries in the presalt layer off Brazil, triggered by last year's Tupi find, are likely to be contiguous, according to a Brazilian oil company expert.

"Recent seismic studies indicate a high degree of contiguity among sites around the Tupi well," said Eduardo Molinari, exploration and production coordinator at Brazil's state-owned Petroleo Brasileiro SA (Petrobras).

Molinari told a meeting of financial-market analysts that such contiguity is a factor that will trigger formal cooperation among the seven companies holding concessions in the region, including Petrobras, BG, Galp, Repsol-YPF, Royal Dutch Shell, ExxonMobil, and Hess.

Under Brazilian law, according to Molinari, concession areas found to be contiguous become the object of joint exploration by companies holding the various concessions to avoid drilling by one company in another's area.

Brazil has been seeking a variety of ways to maximize its control over the fields in the presalt layer, viewing them as a low-risk opportunity for international oil companies.

In July, Brazilian President Luiz Inacio Lula da Silva set up a commission to study rule changes for the development of the presalt oil reserves. The committee was given 60 days to present proposals, but they may be delayed due to the sensitivity of the issue.

In connection with Lula's aims, Brazil's Mines and Energy Minister Edison Lobao has proposed that a separate company be created to administer production in the presalt area as the oil is a "sovereign asset" that should be used for the benefit of the whole population and not just shareholders of companies.

Under the plan, the new state company would have full control over the oil produced in the presalt area. Petrobras—which is about 60% privately owned—would be a service provider, which either gains a share of production or earns a fee for services rendered.

The Brazilian president appears to support the idea, telling an audience of students on Aug. 12 that the oil discovered in the presalt layer of the Santos basin belongs "to all Brazilians, not just half a dozen oil companies."

Petrobras reported the Tupi discovery last year, estimating that the site could contain 5-8 billion bbl of crude oil. A formal statement on reserves is expected in second-half 2009.

Since the Tupi find, Petrobras and other international oil companies holding exploration concessions in the area have reported oil discoveries from other wells off southeastern Brazil (see map, OGJ, June 16, 2008, p. 38).

Contact Eric Watkins at hippalus@yahoo.com.

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