BG Group Makes `Material' Oil Discovery in Brazil

By Nicholas Larkin

Aug. 8 (Bloomberg) -- BG Group Plc, the U.K.'s third-largest oil and natural-gas producer, said it made a ``material'' oil discovery in the Santos Basin off the coast of Brazil.

BG found 30 degrees API light crude in the Iara well within the BM-S-11 concession area, the Reading, England-based company said today in a statement. The well, operated by Petroleo Brasileiro SA, is still being drilled to evaluate deeper targets, BG said.

Iara is in the same exploration block as Tupi, a field with as much as 8 billion barrels of recoverable oil. Announced in November, Tupi is the largest discovery in the Americas since 1976. The well is also in Brazil's ``pre-salt'' offshore region, a new oil province that may contain about 50 billion barrels of oil according to Peter Wells, a director at U.K. research company Neftex Petroleum Consultants Ltd.

BG rose as much as 38 pence, or 3.4 percent, to 1,144 pence in London and traded at 1,135 as of 8:08 a.m. local time, valuing the company at 37.98 billion pounds ($73.3 billion).

The well, about 75 kilometers (45 miles) north-northeast of Tupi, was drilled in water 2,230 meters deep and to a depth of 5,600 meters beneath the ocean floor, Petroleo Brasileiro said yesterday.

BG holds a 25 percent interest in the concession area. Petroleo Brasileiro, known as Petrobras, has 65 percent and Galp Energia SGPS SA owns 10 percent. Iara is the third well to encounter hydrocarbons within BM-S-11, BG said.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net