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An Investors’ Guide to Libra

Petrobras is the largest deep-water operator in the world, with 22%+ of its activity in the deep. Petrobras is the first company in the world to find and produce gas under a layer of salt on the continental shelf. Its pre-salt discoveries have the potential to position Brazil as having one of the world’s largest oil reserves. Petrobras has proven reserves of about 16 billion barrels of oil, which is forecast to double over the next 3-4 years with new discoveries, and is currently producing almost 350,000 barrels per day of oil equivalent in the pre-salt layer of the Santos and Campos Basins—beyond their expectations. By 2016, the company’s pre-salt production should reach 750,000 bpd, and the forecast for 2020 is nearly 2 million bpd. It sounds fabulous—on paper.

In October 2013 in Brasilia, the National Petroleum Agency (ANP) will hold its first auction for pre-salt oil when it awards a concession for the Libra field, located off the coast of Sao Paulo and Rio de Janeiro in the Santos Basin. This, according to the ANP, will be the last pre-salt auction before 2015 at the very earliest.

Following a 3D survey the ANP estimates Libra to hold 26 to 42 billion barrels of oil equivalent, of which 8 to 12 billion barrels are currently classified as recoverable, making this a historic auction.

However, as a pre-salt field Libra presents some unique challenges: oil and gas deposits will be costly and technically difficult to extract. If the price of oil falls much below $100 a barrel, some wonder whether it even makes business sense to try. Indeed, we’re talking about reserves that are under water, rock and salt up to depths of 7,000 meters below the surface of the Atlantic. And the layers of salt are shifting.

Libra is a large area (1547.76 km2), and will likely require nine to ten FPSOs at a minimum and about 100 production wells supported by 100 injection wells to attain maximum recovery which could be up to 1 million bpd. Many analysts believe profitable production could be 10, or even 20 years away for whoever wins the rights to explore and produce in Libra.

The director of the ANP, Magda Chambriard, said wells already drilled there prove Libra’s viability, but she failed to mention in her stump speech that the first well drilled by Petrobras at the field cost $150 million and collapsed in 2010 before any oil was extracted.

The ANP is talking up Libra’s potential,…




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