BRAZIL: April 15, 2008


RIO DE JANEIRO - An offshore find by Brazilian state oil company Petrobras in partnership with BG Group and Repsol-YPF may be the world's biggest discovery in 30 years, the head of the National Petroleum Agency said on Monday.


Haroldo Lima told reporters the find, known as Carioca, could contain 33 billion barrels of oil equivalent, five times the recent giant Tupi discovery. That would further boost Brazil's prospects as an important world oil province and the source of new crude in the Americas.

Shares in Petrobras, which said studies on the find continued and would not comment on the figure, soared on the news. They were trading 5.7 percent higher at 83 reais in the late afternoon, after retreating somewhat from gains of more than 7 percent.

"It could be the world's biggest discovery in the past 30 years, and the world's third-biggest currently active field," Lima, head of the government's oil and fuel market regulator, told reporters at an industry event in Rio de Janeiro.

He would not say whether the preliminary reserve estimate was recoverable or in-place. Recoverable reserves can constitute less than a third of in-place reserves.

Last year Petrobras put Tupi's recoverable reserves at between 5 billion and 8 billion barrels of oil equivalent, most of it light oil.

Lima said his data came from Petrobras at an informal level.

Petrobras tested one well at Carioca last year and is still drilling another. The company made the Tupi recoverable reserve estimate based on tests from two wells.

Petrobras said in a statement the second well had not yet reached the subsalt level and "more conclusive data on the potential of the block will be known after the evaluation process is finished."


FIND COULD BE 'REALLY HUGE'

Analysts said the estimate was probably still very preliminary, although it did not contrast with some geologists' forecasts made in the past.

"It's a very relevant number, basically triples the reserves. But it still seems a little premature to have a precise number while they are drilling a second well," said Felipe Cunha, an analyst with Brascan bank in Rio de Janeiro.

The Carioca area lies west of Tupi in the prolific Santos basin, off the coast of Sao Paulo state. BG has a 30 percent stake in the project and Repsol 25 percent.

"It's subsalt, and we knew there were big expectations for the subsalt cluster in addition to Tupi. But, if this is confirmed, it's really huge," said Sophie Aldebert, associate director with Cambridge Energy Research Association in Brazil.

"With that size, you'd have plenty of gains of scale that could easily offset the subsalt geological challenges," she added. The challenges include shifting salt clusters that require reinforced piping and producing in deep waters from huge depths under the ocean floor.

Geologists had long voiced the theory that Tupi could have an even bigger neighbor containing light oil or natural gas. If the reserves are confirmed, Brazil could jump into the top 10 oil countries by reserves, surpassing nations like Nigeria.

Petrobras also has said previously it sees good prospects for major oil finds in the subsalt areas in the Campos and Espirito Santo basins north of Santos, but it is focusing mainly on Santos at the moment.

Most of Petrobras crude comes from heavy-oil Campos basin fields, but recent subsalt discoveries could make Brazil a major producer of higher quality oil.

The company expects to start an extended production test at Tupi early next year and then crank up a 100,000 barrels per day pilot project there in late 2010 or early 2011. Analysts say, however, the costly subsalt development can take more time than Petrobras expects.

(Additional reporting by Denise Luna; Editing by Walter Bagley)


Story by Rodrigo Gaier and Andrei Khalip


REUTERS NEWS SERVICE