World Mining Exploration News

Brazilian Offshore Oil Projects May Be Delayed, Khelil Says

The development of deepwater oil fields off the coast of Brazil may be delayed as the credit crisis makes it harder to finance projects, OPEC President Chakib Khelil said.

Developing Brazil’s offshore fields may involve investing $100 billion, for which financing from foreign banks is needed, Khelil, who is also Algeria’s oil minister, told reporters in Vienna today. Petroleo Brasileiro SA Chief Executive Officer Jose Sergio Gabrielli on Oct. 20 said some of the company’s projects may be delayed because of the international credit crunch.

“Lots of companies are not going to get any financing for developing fields,” Khelil said. Crude oil prices have more than halved since rising to a record $147.27 on July 11 and that drop may also affect some projects. Canadian oil-sands projects require prices of $90 a barrel and ultra-deepwater drilling needs oil at $70 a barrel to be viable, according to Khelil.

Petrobras, as Brazil’s state-controlled oil company is known, said in November that the Tupi discovery may hold as much as 8 billion barrels of oil, the largest find in the Americas since the 1976 discovery of Mexico’s Cantarell field. If confirmed, Tupi and the neighboring Iara field could almost double Brazil’s 12.6 billion barrels of proven oil reserves, according to BP Plc.

Petrobras’s press office wasn’t immediately able to respond to a request for information. Brazil isn’t a member of the Organization of Petroleum Exporting Countries, which supplies more than 40 percent of the world’s oil.

Petrobras plans to have 11 oil platforms operating in the so-called pre-salt cluster near its Tupi field by 2017, Jose Formigli Filho, head of exploration and production at Petrobras, said Sept. 16.

Pre-Salt

Tupi lies in a petroleum province known as the pre-salt area, which runs 800 kilometers (500 miles) along Brazil’s coast from Espirito Santo to Santa Catarina states. The province has oil deposits beneath a layer of salt resting as much as 3,000 meters beneath the ocean surface and another 3,000 to 5,000 meters below the seabed.

Jose Antonio Figueiredo, executive manager for engineering at Petrobras, on Oct. 6 said the drop in oil prices doesn’t put any of its projects at risk. Petrobras, in its most recent strategic plan released last year, forecast the projects to make money with oil above $35 a barrel, Figueiredo said.

Petrobras considers oil in the so-called pre-salt offshore region to be “very attractive” with crude oil at $90 a barrel, Paulo Roberto Costa, the company’s chief of refining and supply, said Sept. 30.

`So Generous’

“The pre-salt region is so generous in terms of oil supply that whatever the cost of extracting, it will still be cheap in relation to quantity and in relation to the price around the world,” Brazil’s Energy and Mines Minister Edison Lobao said Oct. 10 at a conference in Lisbon.

Petrobras and its partners may spend as much as $50 billion to develop Tupi, said Mauro Andrade, a Rio de Janeiro-based senior manager of Deloitte & Touche LLP’s Petroleum Services Group. Andrade estimates Tupi’s recoverable oil reserves at 5 billion to 5.5 billion barrels, meaning development costs would be about $10 per barrel of oil equivalent, he said Oct. 3.

Rio de Janeiro-based Petrobras is the operator and owns 65 percent of the block where both the Iara and Tupi wells were drilled. BG Group Plc, the U.K.’s third-largest oil and natural- gas producer, owns 25 percent and Galp Energia SGPS SA, Portugal’s biggest oil company, holds a 10 percent stake.