April 16, 2008 / 5:48 PM / 11 years ago

CS sees smaller Brazil oil find but still bullish

RIO DE JANEIRO, April 16 (Reuters) - A giant Brazilian oil reserve estimate that came out this week is overblown, but a larger area encompassing the find could indeed contain 33 billion barrels, Credit Suisse energy analysts said on Wednesday.

The analysts stressed they remain bullish on the country’s oil prospects in the so-called subsalt cluster and consider feasible the reserve estimate in a structure known as Sugar Loaf, including blocks that are still not under concession.

The four licensed blocks would at best contain about half that amount, according to available estimates, they said. These blocks also involve more oil firms than the partners in the BMS-9 Carioca find.

Brazil’s Petrobras (PETR4.SA)(PBR.N), BG Group Plc BG.L and Repsol-YPF (REP.MC) are the partners in BMS-9. Other companies involved in Sugar Loaf blocks are Hess Corp (HES.N), Exxon Mobile Corp (XOM.N) and Porugal’s Galp (GALP.LS).

The head of the National Petroleum Agency (ANP), Haroldo Lima, said on Monday that Carioca could contain 33 billion barrels of oil equivalent, although the government’s ANP distanced itself from his statement later and field operator Petrobras said more drilling and studies were needed.

“We are bullish on the Brazilian pre-salt play, but we’re also trying to keep this story grounded in reality,” analyst Mark Flannery told a conference call after last week’s visit by a team from Credit Suisse Global Energy to Brazil.

“We believe Lima was saying that the whole Sugar Loaf structure might contain 33 billion barrels. That’s something we certainly think is possible,” he said, explaining that part of the confusion was in the name Carioca, sometimes applied just to the BMS-9 find, and at times to the whole Sugar Loaf area.

Credit Suisse works with a “risked estimate” of 6.7 billion barrels of oil equivalent for the four-block part of Sugar Loaf under concessions and a more optimistic “blue sky” estimate of 15 billion barrels. That includes the BMS-9 range of between 2 billion boe and 5 billion boe.

Only around half of Sugar Loaf is in license blocks, so doubling the blue-sky estimate would give a number similar to the 33 billion boe provided by Lima, Credit Suisse said.

“We’re not saying that this is what happened, rather that you can get to 33 billion barrels for Sugar Loaf without having to do any complicated math or rely on any hard new information, of which there is none,” Flannery said.

The analysts said they saw the most upside potential for stocks in Petrobras, which is a partner in all Sugar Loaf blocks, and Britain’s BG. Petrobras shares retreated 1.3 percent after two days of big gains, while BG climbed 0.7 percent, adding to Tuesday’s rise. (Reporting by Andrei Khalip; Editing by Christian Wiessner)

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