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ODAC Guest Commentary - Brazil Carioca find

The discoveries during 2007 of Carioca in BM-S-9 and Sugar Loaf in BM-S-8 within the Santos Basin, as well as other discoveries in the region, are very significant in that they confirm the potential of the sub-salt play originally identified in Tupi (BM-S-11) in 2006. Tupi pointed to the potential of the area for further oil and gas accumulations buried beneath a layer of salt and these wells confirm that potential.

The reason such a play has remained hidden for so long is this salt layer, which presents the dual challenge of imaging (since salt is relatively impervious to seismic energy) and drilling (since salt tends to wash out whilst drilling, creating zones of lost circulation) as well as the great water depth (over 2000m). In addition Petrobras has had its work cut out in the Campos Basin up to now. Modern technology, high oil prices and new foreign contractors are progressively overcoming, albeit at great cost, all these challenges.

The play will add large volumes to Brazil's reserves. However, as always, there are question marks. Firstly the press reports do not reveal how much of the volumes are gas, especially since the Santos Basin, has, up to now, been a gas-prone region. Also with just a few wells it is impossible to be sure of such large volumes. Proper analysis and application of SEC rules to the definition of proven plus probable reserves would likely limit volumes to less than 500 million barrels until additional successful wells are drilled. What's more the complex geology and difficult surface conditions would mean many years (up to a decade) before such discoveries could be put into production, particularly in such a tight market for deep water equipment and personnel.

Nevertheless the find is very significant to Brazil. It has long been known that large resources of oil and gas are located beneath the salt basins of the world. Indeed many deep water fields in the Gulf of Mexico are already being exploited from such horizons. The play could perhaps eventually add 1 mm bbls per day by 2030 (if the reports are reasonably accurate) and delay the Brazilian peak date by a decade (to 2025). However in a global sense the play is unlikely to affect the oil supply situation significantly over the coming decade. A net loss of over 500,000 barrels per day each year to the global market will probably be already occurring (and growing) by the time the first giant fields in the Santos Basin ramp up their output.

Dr. Michael R. Smith -

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