New oil reserves in Brazil face technical, cost problems

Brazil has to solve a series of technology and cost-related problems before its newly-discovered oil field with an estimated reserve of up to 8 billion barrels could pump oil for the country and the thirsty world market, analysts said.

In November, state-owned company Petrobras said it discovered some oil reserves in the Tupi field at the Santos Basin off the southern Brazilian shore in the sub-salt layers at a depth of some 5 to 8 km.
The salt structure above the oil reserve is 2 km thick. Petrobras has decided to jointly explore it with British company BG and Portugal’s Galp.

“It is a positive factor, but it is subject to costs,” Reginaldo Takara, who works for Standard and Poor’s, a famous provider of credit rating based in the United States, told Xinhua from Sao Paulo.

“It is still too early to speak about it from a credit point of view.” he said.

“The discovery demands significant investments on a new geological frontier, where productions will face high costs and both financial and technical challenges,” said Takara.

Petrobras has publicly announced forecast for production at 100,000 barrels a day (bpd) from a pilot project at Tupi by 2013.

The International Energy Agency (IEA) urged caution on the oil field, saying “with initial estimates based on only two wells, new drilling will be needed before reserves can be proven and a viable production timetable drawn up.”

Brazilian oil expert Giuseppe Bococcoli told Xinhua that Tupi requires a minimum investment of 35 dollars per barrel, before financing costs are taken into account. Part of the problem is that salt must be moved before the oil in the lower layer can be dug out.

Xinhua