Petrobras confirms that oil recovery viable at $40 a barrel

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The Brazilian state-controlled Petrobras has said this week that production from the massive oil fields deep below the ocean floor off Brazil’s Atlantic coast was viable at $40 a barrel for benchmark Brent crude. The “pre-salt” reserves, so called because they are located under a thick layer of salt, can be extracted at a cost of less than $40 per barrel, Petrobras finance chief Almir Barbassa told reporters in Sao Paulo.

Brent, used as the benchmark for crude from the pre-salt layer, was trading today above $69 per barrel. “But we still have a lot to improve in terms of production and that is something we are working hard at. Our engineers are dedicated to developing a production method that is more adequate for the pre-salt zone,” the Petrobras executive said.

The discoveries in the pre-salt layer, first announced in late 2007, could eventually lead to a nearly six-fold increase in Brazil’s current proven reserves of 14 billion barrels and transform the South American nation into a major oil exporter.

Acknowledging that Petrobras alone is not capable of developing the massive pre-salt reserves, Brazil announced last month that it would invite foreign oil companies to bid for concessions in that area beginning next year.

The South American country had halted the sale of concessions after the massive finds were made.

Brazil expects “to go from production of between 2 and 2.4 million barrels of petroleum daily to 5.7 million in 2020,” Barbassa said. The “ambitious” strategic plan unveiled by Petrobras in January was well-received by investors, with the company’s shares on the Sao Paulo and New York stock exchanges outperforming the benchmark indexes for both markets, Barbassa said.

In January, the Brazilian oil giant released its 2009-2013 business plan, which includes the pre-salt assets for the first time and calls for a sharp increase in investment from $112.4 billion to $174.4 billion.

“We were prepared for the crisis that came. So we were able to announce an ambitious plan in the middle of a crisis that required more financing than previous ones and thereby keep the company on pretty solid ground,” Brabassa said.

Petrobras, an integrated energy company and the global leader in deepwater oil exploration and production, operates in 27 countries in the Americas, Africa, Asia and Europe.

Shares of Petrobras, Brazil’s largest corporation, trade on the Sao Paulo, New York, Madrid and Buenos Aires stock exchanges, but the Brazilian government retains control through a golden share.

Latin America Herald Tribune

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