Brazil's Petrobras sees few prospects for Iran oil

* Petrobras sees limited prospects in Iran

* Focusing on developing domestic sub-salt reserves

* Will continue projects in U.S., Turkey

By Brian Ellsworth and Denise Luna

RIO DE JANEIRO, July 3 (Reuters) - Brazil's state oil company Petrobras expects exploration of an Iranian block will yield disappointing results, a company director said on Friday, adding another Iranian block has shown similarly dim prospects.

Petrobras (PETR4.SA)(PBR.N) International Director Jorge Zelada said in an interview that the offshore Tusan block in the Gulf that the company won rights to in a 2003 bidding round was geologically unappealing.

"Our expectation is for a sub-commercial reserve," said Zelada. "It is a small reserve ... we have not yet finished the report, but the expectation is that it does not have commercial possibilities."

Petrobras invested around $100 million to drill two wells in Tusan and in February said it had found signs of oil.

The company had also been evaluating data from a block in the Caspian Sea, but decided against an exploration campaign because the block appeared to hold mostly natural gas, rather than oil, in an area that did not have infrastructure for gas production.

"There is no Petrobras exploration activity in the Caspian Sea. There was an opportunity that Petrobras reviewed and decided not to continue with," he said.

An Iranian official told Reuters this week that a Malaysian company was now in the running for a Caspian Sea block that Petrobras had previously been evaluating.

Petrobras produces around 215,000 barrels per day (bpd) of oil outside Brazil but is mostly focusing on developing massive offshore reserves buried under a thick layer of salt off Brazil's coast.

It continues to develop upstream projects in Turkey, Namibia and the Gulf of Mexico, but is not seeking out new foreign opportunities because it wants to channel resources toward sub-salt projects, Zelada said.

He said by the end of the year the company should begin drilling in the Black Sea block of Kirklareli and by early next year in the deep water Sinop Block, both in a 50-50 partnership with Turkey's state oil company.

In the U.S. Gulf of Mexico, Petrobras in about a year will begin operating a floating production storage and offloading (FPSO) terminal, the first such operation to be deployed there, for the the Cascade and Chinook fields.

Petobras has almost 300 oil and gas blocks in the U.S. Gulf, most of which are relatively small and still in exploration phase.