BG on the climb after huge oil find off Brazil
A major new oil discovery nearly four miles deep under the South Atlantic off the coast of Rio de Janeiro sent shares in British explorer BG soaring today and strengthened the belief Brazil could become the Saudi Arabia of the 21st century.
BG, working alongside the state oil company Petobras, said it has hit upon a new field with reserves of up to four billion barrels, the equivalent of enough oil to power the Brazilian economy for five years, or more than one year's output from Saudi, the world's biggest producer.
The latest find is in the Iara field in the deep offshore Santos basin, where initial discoveries two years ago of fields with reserves of eight billion barrels first prompted speculation that Brazil will be catapulted into the world's eight-strong elite of countries with reserves of more than 50 billion barrels.
"The upside case of the Iara reserves announcement is said to imply that many of the discoveries to date are connected as part of one massive structure with tens of billions of barrels of reserves," said Citigroup oils analyst David Thomas.
BG said the Iara find, 150 miles off the Brazilian coast, is in 2230 metres of water with the total depth of drilling topping six kilometres.
As such the cost of developing the fields will be massive, running into hundreds of billions of dollars. BG has a 25% interest in the concession, which is 65% controlled by Petrobras.
BG chief executive Frank Chapman said the discovery was as good in quality and quantity as the company and its investors could have hoped for.
"Brazil will become a very major production centre for our company and will sustain a major earnings contribution over at least three decades," he said.
Some analysts believe the find could be worth in excess of 100p a share for BG, whose stock has been on the slide in recent months as a result of the falling oil price and the group's controversial and ultimately abortive £5billion takeover bid for Origin of Australia.
Shares in BG rose 47p to 1102p.
