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2nd UPDATE:Tupi, Iracema Volumes To Swell Oil, Gas Reserves In Jan -Petrobras

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(Adds comment from President Lula, information on "supergiant" oil fields.)

 
  By Diana Kinch 
  Of DOW JONES NEWSWIRES 
 

RIO DE JANEIRO -(Dow Jones)- Brazilian oil and gas giant Petroleo Brasileiro SA (PBR, PETR4.BR), or Petrobras, and its partners said they would book up to 8.3 billion barrels of recoverable oil and gas reserves from the Tupi and Iracema blocks in the pre-salt area off the southeastern coast of the country.

Petrobras has now declared that one field in each area is commercially viable, and will include part of its share of the oil in its annual reserves statement, which will be released Jan. 15.

Petrobras often names its oil fields after fish and other sea animals, and plans to name the field at Tupi "Lula," which is Portuguese for squid but may also be an homage to President Luiz Inacio Lula da Silva, who is often known as Lula, and who leaves office Dec. 31. The field at Iracema will be called "Cernambi" field.

The Lula field will be Brazil's first "supergiant" oil field, located in the pre-salt area, which lies beneath some two kilometers of Atlantic Ocean and a further five kilometers below sand, rock and a shifting layer of salt. The Tupi deposits, Brazil's first major pre-salt finds, were discovered in 2006, and 11 wells have been drilled there since that time. A long-term production test started in April 2009.

Petrobras defines a "supergiant" field as one having recoverable volume of more than five billion barrels of oil equivalent.

President Lula, speaking during a ceremony to mark the laying of a foundation stone at a new Petrobras oil refinery, said he was proud to have the same name as the new oil field. "Thanks, my comrades at Petrobras, for using my name," he said.

Petrobras has now determined that Lula field contains an estimated 6.5 billion barrels of recoverable volume. The medium-quality oil has been tested at 28 degrees API, Petrobras said in a statement sent to Brazilian oil regulator ANP Wednesday. This was at the mid-point of the initial estimate of between five billion and eight billion barrels, which was made in 2009, a Petrobras spokesman said.

Iracema, meanwhile, has 1.8 billion barrels recoverable volume, with slightly higher quality oil at 30 degrees API. Again, this was at the mid-point of a 2009 estimate of between one billion and 2.5 billion BOE from the site, according to the spokesman.

Petrobras has proven reserves of 14.8 billion barrels, but new discoveries over the past year mean the market is expecting the next proven reserves statement to be "substantially" higher, he said.

Not all oil from Tupi and Iracema will be counted as reserves, the spokesman said. This is because the recoverable volume stated includes proven, probable and possible reserves, which can only be fully translated into proven reserves for the reserves statement via extra drilling and tests, he said.

Now that the two fields have been declared viable, Petrobras can present development plans, detailing how it plans to take the oil out over the longer term.

Credit Suisse analysts interpreted "the news as positive in the sense that it expands Petrobras' resource base and further increases confidence on the large potential of the Santos presalt" area.

"We expect Petrobras to become more vocal about costs and production forecasts going forward...This will be key for the stock's performance in 2011," Credit Suisse said.

Tupi and Iracema, in the offshore Santos Basin, form part of the BMS-11 oil exploration block, which is operated by Petrobras, with a 65% stake in the concession. BG Group PLC (BRGYY, BG.LN) holds 25% and Galp Energia SGPS SA (GALP.LB) 10%. BG and Galp will therefore gain a proportion of the volumes and reserves from the sites now declared viable.

 

-By Diana Kinch, Dow Jones Newswires; 55-21-2586-6086; diana.kinch@dowjones.com

 
 

(END) Dow Jones Newswires

December 29, 2010 17:18 ET (22:18 GMT)

Copyright (c) 2010 Dow Jones & Company, Inc.

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