| RIO DE JANEIRO
RIO DE JANEIRO Jan 23 Brazil's state-owned oil
company, Petrobras, and its partners plan to abandon the major
Bem-Te-Vi offshore oil prospect to concentrate investment on a
larger discovery nearby, a source with direct knowledge of the
decision told Reuters.
Located in the BM-S-8 block in the Santos Basin south of
Rio, Bem-Te-Vi is being returned to Brazil's oil regulator, the
ANP, along with at least part of the Biguá prospect, in the same
block. The partners in BM-S-8 plan to focus instead on another
prospect of the block, Carcará, a discovery many believe to be
one of the largest ever in Brazil.
"The Carcará discovery is a good one and efforts in the
block will be concentrated there," the source told Reuters on
the condition anonymity. "Bem-Te-Vi and Biguá don't represent as
much to the partners."
Returning the discovery, though means Petrobras
and its partners, Brazil's QGEP Participações SA,
Brazil's Barra Energia and Portugal's Galp Energia SGPS
, will get nothing for the millions of dollars they
have spent drilling and evaluating the area.
And while the return of Bem-Te-Vi will free up cash to
develop the recent Carcará find nearby, failure to sell the area
to another company or group prevents a cash-strapped Petrobras
and partners from cutting losses and raising cash to develop
Carcará, industry experts said. It may also force Petrobras and
partners to take a charge against earnings.
If Bem-Te-Vi is as large as Petrobras officials suggested in
2008, Brazil's government will forgo billions of dollars in
royalties, taxes, and jobs that Bem-Te-Vi's oil was expected to
"This doesn't make any sense unless somebody screwed up or
Bem-Te-Vi is a dud," said Cleveland Jones a geologist with the
Brazilian Petroleum Institute at the State University of Rio de
"Sure, Petrobras doesn't have money to develop it, but then
you sell the area, get some cash and in the worst case cut your
losses," he added. "I don't see how anybody wins here, not
Petrobras, not the government."
Located in the BM-S-8 block, it was one of the first giant
"subsalt" oil finds that kicked off a Brazilian oil boom in 2007
While Petrobras never announced how much oil Bem-Te-Vi
contained, it was part of a group of subsalt "super giant"
prospects, including Jupiter, Guara and Iara that contained an
estimated 6 billion barrels of oil, nearly enough to supply all
U.S. needs for 11 months.
The subsalt refers to an area in Brazil's Santos and Campos
basins where large oil discoveries have been made deep beneath
the seafloor under a layer of salt.
A dud though, may be exactly what Bem-Ti-Vi is, an industry
source with direct knowledge of the block told Reuters. Early
drilling suggested the prospect contained large, possibly
billions of barrels of oil. The government and Petrobras
trumpeted the discovery as one of a galaxy of fields that would
transform Brazil into a rich, developed nation.
The consortium though, believed making money from the
prospect would be hard and did not even try to sell it, the
industry source said.
"After the initial drilling, Bem-Te-Vi never amounted to
much, even Biguá was less bad," the source, who only spoke on
condition of anonymity said. "Returning it made sense its
The former Petrobras chief executive of the time, Jose
Sergio Gabrielli, repeatedly described the subsalt as nearly
risk-free exploration and the reputation of the oil producing
potential of the geological formation has won massive billion
dollar, upfront fees from oil companies bidding to drill into
In September, ANP approved the return of Bem-Te-Vi along
with an expansion of the "ring fence" around the Carcará
prospect to include a small portion of Bem-Te-Vi as part of the
block's Discovery Evaluation Plan, according to unreleased
documents shown to Reuters, which Petorbras confirmed on
The expanded ring fence protects a larger area of the
discovery for future development. A ring-fence is the outside
edge of the reservoir that an oil company plans to develop.
Petrobras said it also proposed the return of part of the
lesser-known Biguá field, which is also in the BM-S-8 block but
asked for an extension until March to decide whether it would
return the rest of the field.
Officials at QGEP and Barra Energia were not available for
comment. Galp officials could not be reached for comment.
Petrobras, owns 66 percent of BM-S-8 and is the operator.
Brazil's QGEP Participações SA and Barra Energia own
10 percent each and Portugal's Galp Energia SGPS, in
partnership with China's Sincopec owns 14 percent.
(Reporting by Jeb Blount; Editing by Reese Ewing and Andrew