Brazil says Libra oil field can reach 1 million barrels

By Peter Millard and Laurie Hays
Bloomberg News

Brazil’s largest oil prospect can “easily” reach a million barrels a day, double the output of OPEC member Ecuador, as international companies prepare to compete in an October bidding round, the chief regulator said.

Libra, where state-run Petroleo Brasileiro SA gets a minimum 30 percent stake by law, eventually will have 12 to 18 production vessels anchored across the reservoir in deep waters off the southern Atlantic, Magda Chambriard, the head of the National Petroleum Agency, said in an interview. Each well will pump as much as 30,000 barrels a day, in line with the most productive in Brazil, she said.

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Brazil, home to the largest crude discoveries this century, is relying on the so-called pre-salt region to double production by 2020. Rio de Janeiro-based Petrobras has beaten its output expectations at Lula, the first producing pre-salt field, helping counter a decline at decades-old fields closer to shore. The government’s “take” from Libra would be at least 70 percent, Chambriard said. That includes taxes, a signing bonus and so-called profit oil that companies must pledge to win a stake in the field, she said.

“All big companies expressed interest in this type of bidding,” she said today from the agency’s headquarters in downtown Rio de Janeiro. “It is possible to consider one million barrels a day for Libra, easily.”

Road Show

The government probably will get more than a 70 percent take because competition will be strong in the auction, Bob Fryklund, vice president of energy consulting firm IHS CERA Upstream Research, said by phone today from New York. Countries including Libya and Venezuela have a higher government take at oil projects, he said.

Chambriard said it would be “reasonable” to start production at Libra within five years. Libra has as much as 12 billion barrels of recoverable reserves.

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A team from the oil regulator will travel to the U.S., Europe and Asia starting late this month to market Libra to potential bidders, she said. The world’s largest oil companies are expected to compete, including Chinese companies.

Petrobras, as the world’s biggest producer in waters deeper than 1,000 feet is known, will operate the project and must compete as a bidder to get more than 30 percent. Other competitors can form groups or bid individually for the remaining 70 percent on Oct. 22.

Signing Bonus

Brazil’s government will determine a signing bonus for the project and the competitors will win by pledging the largest amount of so-called profit barrels to the government.

“When the field is larger, when it has more volume, the government percentage is more,” Magda said. “This is the spirit of profit sharing. It is impossible to consider less than 70 percent as a government take.”

The regulator, known as ANP, doubled the reserves estimates at Libra to 8 to 12 billion barrels on May 23 after CGG Veritas, a geophysical services company, conducted a study of the first exploration well. ANP encountered a layer of oil 326 meters deep at the well and did imaging of the surrounding area. The previous estimate was 5 billion barrels.

“This is very unique,” Fryklund said. “Some of the Asians could be on the top of the list, because some of them don’t like exploration risk.”