Brazil Field Smaller Than Claimed, Credit Suisse Says (Update3)
By Joe Carroll
April 16 (Bloomberg) -- Brazil's Carioca prospect may have 98 percent less crude than a figure cited by the country's oil agency, Credit Suisse Group said, challenging claims that the field is the biggest-ever discovery outside the Middle East.
Haroldo Lima, director of Brazil's National Oil Agency, sent shares of Petroleo Brasileiro SA and other Carioca stakeholders higher when he said April 14 that the offshore field may hold 33 billion barrels of oil. That figure is ``way off the mark,'' Mark Flannery, a Credit Suisse analyst in New York, said today on a conference call with clients.
An estimate of about 600 million barrels ``sounds reasonable,'' Flannery said, adding that the firm isn't yet giving an official assessment of its own. The estimate cited by Lima was probably intended for the entire subsea geological formation known as Sugar Loaf, which encompasses multiple fields, Credit Suisse said.
``A lot of exploration and delineation is going to need to take place,'' Emerson Leite, a Credit Suisse analyst who's been following Petroleo Brasileiro for a decade, said on the conference call. ``We are very early in the process here.''
Flannery and other Credit Suisse analysts convened today's call in response to Lima's comment after returning from a trip to Brazil. The analysts met with Petroleo Brasileiro executives during their visit.
A deposit of 600 million barrels would be comparable to the Tahiti field, discovered by Chevron Corp. in the Gulf of Mexico. At 33 billion barrels, Carioca would be outranked only by Saudi Arabia's Ghawar field and Kuwait's Burgan.
Estimate Questioned
Lima told Brazilian lawmakers yesterday that he obtained the estimate of 33 billion barrels from a publication called World Oil. Petrobras, as state-controlled Petroleo Brasileiro is known, said it needs at least three months to determine how much oil can be recovered from Carioca.
Within hours of Lima's comments, Merrill Lynch analysts Frank McGann and Shariff Koya issued a note to clients calling Carioca a ``giant field'' that could ``potentially dwarf Petrobras' existing reserves.''
The next day, Citigroup Inc. analyst David Thomas said the prospect may yield 10 billion barrels of recoverable oil, enough to supply every refinery in the U.S. for almost two years.
Lima ``was effectively saying that the whole of the Sugar Loaf structure might contain 33 billion barrels of oil, something we think is certainly within the bounds of possibility,'' Credit Suisse's Flannery said.
Shares Fall
Petrobras' preferred shares fell 49 centavos, or 0.6 percent, to 83.40 reais in Sao Paulo. The stock declined even as an index of the largest U.S. and European oil companies, including Exxon Mobil Corp. and Total SA, rose to a seven-week high. Before today, Petrobras had climbed almost 7 percent this week.
Jose Sergio Gabrielli, chief executive officer at Petrobras, yesterday declined to discuss the estimate. The company began drilling a second well at Carioca on March 22.
``As soon as we finish the drilling process, we'll have better information,'' Gabrielli said in an interview yesterday in Cancun, Mexico.
Brazilian prosecutors said they will investigate Lima's comments and whether other officials had information about the oil field, Globo newswire reported yesterday. Lima and Gabrielli face a hearing over Lima's claims in Brazil's lower house, Agencia Estado said today.
BM-S-9 Block
Carioca, located 273 kilometers (170 miles) off Brazil's southeast coast, is the only proven discovery out of the seven prospective fields identified in the offshore BM-S-9 block, the Credit Suisse analysts said.
If the other six prospects turn out to be as large as Carioca, the entire block may hold 3 billion to 4 billion barrels of crude, Credit Suisse said.
Brazil holds an estimated 12 billion barrels of crude reserves, South America's second-largest deposit behind Venezuela, according to London-based BP Plc.
Petrobras owns 45 percent of Carioca. The U.K.'s BG Group Plc holds a 30 percent stake, and Repsol YPF SA of Madrid controls 25 percent. New York-based Hess Corp. and Exxon Mobil are among the companies that own stakes in nearby projects.
Carioca remained out of sight to geologists until recently because the oil industry lacked the technology to assess reserves obscured by undersea salt formations, Dick Gibson, a geologist who's been advising oil and natural-gas companies since 1975, said in an April 14 interview.
To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net.
Last Updated: April 16, 2008 16:51 EDT
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