Brazil reports bonanza oil find

Brazil’s prospects of becoming a leading oil producer increased yesterday when it emerged that a giant offshore field could be double the size of BP’s discovery last week in the Gulf of Mexico.

Petrobras, the national oil company, reported that the Guará field contained the equivalent of 1.1bn to 2bn barrels of recoverable oil and gas. BP’s Tiber field, which BP called a “giant” discovery last week, is unofficially estimated to contain 500m-1bn recoverable barrels.

The news from Petrobras pushed up the share prices of BG and Repsol, the UK and Spanish oil companies that are partners in developing Guará. The field could enter production as soon as 2012.

To reach Guará’s oil the developers must drill 2km under the sea and through several more kilometres of rock and semiliquid salt. The oil strikes at Guará and Tiber show the technological complexities and high costs in exploiting this century’s new oil bonanzas. The Tiber well, the deepest ever drilled, is 9km beneath the seabed.

The higher-than-expected estimate of Guará’s size has raised hopes about the prospects for nearby offshore fields in Brazil. Petrobras has not released reserves estimates for several of them.

The best indication of their potential come from the Tupi and Iara fields, part of the crescent of fields including Guará, which together hold an estimated 8-12bn barrels of recoverable oil, according to Petrobras, making them among the biggest oil strikes of recent decades.

BG is a joint venture partner at Tupi. The company’s shares rose 4 per cent to £10.95.

Ten days ago Brasília proposed new regulations for the region where Guará is located.

These introduce production sharing agreements alongside the existing concessions system, with the aim of securing ownership over these potentially vast reserves.

The proposed changes have brought claims from the oil industry that they introduce unnecessary uncertainty and will deter investment. The region is estimated to hold 50bn to 100bn or more barrels of oil and gas equivalent, enough to make Brazil a major oil exporting nation on the scale of its neighbour Venezuela.

Petrobras holds 45 per cent of Guará and is field operator. BG’s stake is 30 per cent and Repsol’s 25 per cent. Guará was discovered in June 2008.