Tupi field a boost for Brazil’s Petrobras

By Sheila McNulty in Houston and agencies - FINANCIAL TIMES

Published: November 8 2007 22:43 | Last updated: November 9 2007 08:38

Petroleo Brasileiro, or Petrobras, Brazil’s state-owned oil company, on Thursday said well tests revealed its Tupi field may contain as much as 8bn barrels of oil and natural gas, which would considerably bolster the country’s energy clout.

The estimate, if correct, would raise the country’s reserves by 62 per cent and just about put Tupi on par with Norway’s 8.5bn barrels of proved oil reserves.

Brazil has 14.4bn barrels of proved reserves of oil and natural-gas equivalent.

The news pushed up Petrobras’ shares 9.95 reais, or 14.2 per cent, to 80.2 on the São Paulo stock exchange, the biggest rise in more than nine years.

It also lifted the share price of BG Group, which holds a 25 per cent stake in the field for a second day. BG shares opened 33p higher at £10.22, following Thursday’s 10 per cent advance.

Shares in Galp Energia of Portugal, which holds 10 per cent, also rose for a second session. The shares, which had their biggest one-day gain in Lisbon on Thursday, rose 21 per cent €2.60 on Friday to €14.95.

Petrobras’ news release contained few details beyond the fact that the estimates were made after analysis of the formation tests for a second well in the area.

The company also said the oil within was light, which is more valuable because it is cheaper to refine than the heavier crude oil that Brazil mostly produces.

“Tupi changes everything for Brazil and Petrobras,’’ said Carlos Renato Nunes, an oil analyst with São Paulo-based brokerage Coinvalores CCVM who has a buy recommendation on Petrobras shares.

“Tupi is not only huge, its light oil offers huge cost advantages.’’

And at a time when oil is heading towards $100 a barrel, and energy security is high on the agenda of many governments, the news is sure to boost Brazil’s economic influence. Petrobras, already a well-respected national oil company on the world stage, is likely to receive a further boost from the discovery.

“Brazil needs time to evaluate its new oil potential,’’ Dilma Rousseff, president Luiz Inacio Lula da Silva’s cabinet chief, said at a news conference in Rio de Janeiro.

“This could make Brazil jump from an intermediate producer to among the world’s largest producers.’’

Tupi is three-quarters the size of Kazakh­stan’s Kashagan field, which holds 12bn barrels of recoverable crude and was the biggest find in the past 30 years.

There have only been a few gas discoveries in the past 20 years that would rival it, including the Shtokman field in Russia at 23bn barrels of oil equivalent, and two other Russian finds in the 5bn to 10bn range, Andy Latham, vice-president of exploration services at Wood Mackenzie Consultants in London, said.