Brazil’s proven oil reserves rose 10.65% in 2010 to nearly 14.25 billion barrels, the biggest annual increase in the past eight years, the ANP oil regulator announced this week. Total reserves, overwhelmingly offshore, which also include probable and possible reserves, soared 34.57% to 28.47 billion barrels.
ANP also indicated that proven natural gas reserves increased 15.23%, ending 2010 at 423 billion cubic meters.
The new figures include initial production at the ultra-deep Lula and Cernambi fields, the first to be developed in Brazil’s promising offshore, pre-salt frontier, so-named because it is located deep below the ocean floor under a shifting layer of salt.
Located in a roughly 160,000-sq.-kilometer area, the pre-salt fields could potentially quintuple the country’s current reserves and transform Brazil into a major oil power.
But reaching those deposits will be very costly and pose an enormous technical challenge because they are located at depths of between 5,000-7,000 meters (16,400-22,950 feet). Drastic changes in temperature as the oil is brought to the surface also add to the technical complexity of developing those fields.
A law signed late last year declares the pre-salt reserves to be state property and stipulates that they will be explored and developed by consortiums in which Brazilian state-controlled oil company Petrobras will have a minimum 30% stake.
It further establishes a production-sharing model in which the consortiums must give the Brazilian government a percentage of the extracted crude. They will also be required to make royalty payments.
Under Brazil’s legislation, Petrobras will be the operator of all projects and also can be awarded exploration contracts without a competitive bidding process.
The Brazilian government owns more than 50% of the voting rights in Petrobras, an open capital company whose shares trade on the Sao Paulo, New York, Madrid and Buenos Aires stock exchanges.
Petrobras became the second largest company in the Americas by market capitalization after a 66.9 billion US dollars share sale last September, the biggest in history.