Petrobras' Tupi field to produce 500,000 bpd by '20

RIO DE JANEIRO, June 12 (Reuters) - Brazil's state-run oil company Petrobras PETR4.SA plans to have its giant Tupi oil field fully operational by 2015, with output of at least 500,000 barrels per day by 2020, a top company official said.

Long-term production tests have begun at two Tupi wells and a third one will start in the coming months, Petrobras’ exploration and production director, Guilherme Estrella, said late on Wednesday.

Petrobras intends to drill eight more wells from 2010 on. Five of them will be producing wells.

“Our estimate is that these 11 wells will cost around $1 billion ... The third well has an estimated cost of $100 million and the other ones of $60-$80 million,” Estrella said on the sidelines of a seminar.

The investment would be funded by Petrobras and its partners British BG Group BG.L and Petrogal, controlled by Portuguese oil company Galp Energia GALP.LS.

Petrobras expects to install five or six floating production storage and offtake (FPSO) facilities to extract oil from Tupi, Estrella said.

Estrella said that despite the “technological challenges” of extracting oil from the subsalt cluster, its exploration is financially viable even with oil prices below $35 per barrel.

U.S. crude oil futures are currently around $133 a barrel, not far from the record-high $139.12 made recently.

Petrobras has put estimated recoverable reserves at the subsalt Tupi field at between 5 billion and 8 billion barrels, which would make it one of the world’s biggest oil discoveries in the last 20 years.

Geologists say Brazil’s total subsalt potential could be 70 billion barrels or more, but experts agree that production could be technologically challenging and costly. Production from above the salt level is easier.

Estrella said Petrobras is also considering exploring the subsalt cluster on Africa’s western coast.

He said an “oil major” has already made an agreement with an African country to explore oil in that region.

“Once we have the knowledge of the Brazilian subsalt cluster, it’s natural that our teams that work abroad become familiarized with the techniques,” Estrella said. (Reporting by Rodrigo Viga Gaier; Translating by Inae Riveras; Editing by Christian Wiessner)