Petrobras' Safety Net Explained

Strategic Reserves

What has most caught the attention of foreign investors is the capacity of Petrobrás to discover new reserves. While the world anxiously awaits the actions of OPEC [Organization of the Petroleum Exporting Countries], Brazil's attention is on the final projections for the Tupí and Júpiter oil fields, which the country hopes will lay the ghost of self-sufficiency to rest.

The latter are the two largest discoveries in the sector in recent years and it is estimated that they will be capable of producing around 8,000 million barrels of oil and natural gas. "If these projections are confirmed, Brazil's oil reserves will be among the 10 largest in the world," says Vitto, for whom the scenario could even be better. "That's not counting unexplored fields which have high chances of containing oil."

Oil finds in the pre-salt layers, which are at a depth of between 5,000 and 7,000 meters, will no doubt change the investment plans of the company for the period 2008-2012. Petrobrás is treading carefully on this issue, although its president José Sergio Gabrielli has already mentioned a bond issue on the foreign market to capture resources with which to back up its investment.

The company has created a body called Pre-Salt Executive Management. At the beginning of the second semester, it has to outline the equipment and other inputs it plans to use for the exploitation of the new oil fields. The technological challenges to putting this into practice are enormous, although experts believe that oil prices already ensure the viability of the operation.

Petrobrás has again been agile in its response, observers note. The company projects that in 2010 it will be able to launch the Tupí pilot project (which is at a depth of 6,000 meters) with an initial production of 100,000 barrels a day and close to 3.5 million cubic meters of gas a day. It is expected that in 2009 the so-called Long Duration Tests will begin (to analyze the characteristics of the rocks and predict future production rate). According to Edmilson Moutinho dos Santos, a professor at the Electrotechnical and Energy Institute at USP (University of Săo Paulo), the company's record with regard to exploration with state-of-the-art technology guarantees that the deadline will be met. "It's a question of management. Not all oil companies are in a position to carry this out because they don't practice technology management," he notes.

In spite of the euphoria surrounding Tupí and Júpiter, the jewel of the crown is called Carioca. Petrobrás and the government do not hide the fact that the new field, located in the Santos Basin area of the state of Río de Janeiro, has the potential to become the largest Brazilian reserve and one of the largest in the world. Somewhat more audaciously, Haroldo Lima, the director general of the National Agency for Petroleum, Natural Gas and Biofuels (ANP), states that it is "the greatest discovery in the oil market in the last 30 years and the field will be the third largest in the world."

Only time will tell whether the expectations of the regulatory agency will be confirmed. What there does seem to be consensus among the experts on, however, is that the discoveries place Petrobrás among the most promising companies in the world -- or, as Vitto says, an excellent medium to long-term investment. "Apart from the fact that it is already an important company, it is more promising (than the companies exploiting oil in the Middle East) because it has already found significant reserves."

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