Sub-$40 oil ‘no bar to Tupi’

http://www.upstreamonline.com/live/article167955.ece

News wires

Brazil’s state-controlled oil company Petrobras, may be able to produce oil from its pre-salt fields in a pilot programme for less than $40 a barrel, the company’s investor relations manager said.

“We’re optimistic that we can produce oil at a cost below $40 a barrel in pilot production in the pre-salt oil fields,” said Theodore Helms, investor relations executive manager for Petrobras.

Petrobra has approved a pilot production project in its Tupi oilfield to begin by the end of 2010 and produce 100,000 barrels a day, said a Bloomberg report.

The project will include five producing wells and three injection wells, Helms said.

“Logistics issues in pre-salt oilfields would be offset in terms of cost by the productivity of the fields assuming the size of these reserves,” Helms said.

“No one can say yet what the break-even price of producing oil in pre-salt fields is because there are a number of unknown factors. There will also be a learning curve.”

Petrobras on 21 November said it found light oil in two wells off the coast of Brazil’s Espirito Santo state, expanding its pre-salt discoveries in an area that’s already producing crude.

Petrobras said in November last year that Tupi, off the coast of Rio de Janeiro, may hold an estimated 5 billion to 8 billion barrels of recoverable oil, making it the largest oil discovery in the Americas since 1976.

Helms said Petrobras will invest about $30 billion this year, half of which will go to Brazilian exploration and production projects.

The oil company this week said it raised $7.5 billion this year to finance investments. Petrobras said in a regulatory filing that it has always borrowed funds in the domestic and international markets.

Helms said there are “ongoing” negotiations with the Chinese development bank for Petrobras to obtain financing from China for its investments.

Helms declined to confirm whether the Brazilian state-controlled oil company is seeking a $10 billion loan from China to fund pre-salt oil exploration.

Tuesday, 09 December, 2008, 16:37 GMT | last updated: Wednesday, 10 December, 2008, 01:41 GMT