Exxon, Hess Find Oil in Brazil’s Tupi Pre-Salt Area

By Jeb Blount and Joao Lima

Jan. 20 (Bloomberg) -- Exxon Mobil Corp., Hess Corp. and Petroleo Brasileiro SA found evidence of oil at an offshore block in Brazil’s Santos Basin in an area that’s close to the Americas’ largest oil discovery in three decades.

The discovery in the country’s so-called “pre-salt cluster” was in water 2,223 meters (7,294 feet) deep and in a well expected to have a final depth of 4,974 meters, the National Petroleum Agency said today on its Web site. The companies haven’t determined if the find can be developed commercially.

The BM-S-22 block operated by Irving, Texas-based Exxon is adjacent to the Carioca field, where Petrobras, as the Brazilian state-controlled oil company is known, along with Repsol YPF SA and BG Group Plc have found oil. It is also about 40 kilometers (25 miles) south of Tupi, a field that Petrobras says holds as much as 8 billion barrels of oil, making it the biggest discovery in the Americas since 1976.

“It’s only a matter of time before this area in Brazil becomes a major future oil supply,” Fadel Gheit, managing director for oil and gas research at Oppenheimer & Co., said in a phone interview from New York. “Still, we don’t want to celebrate this new find too early because very often you get very disappointed. These are difficult areas.”

Wild-Cat Exploration

Exxon and Hess each own 40 percent of the concession, while 20 percent is held by Petrobras.

Hess spokesman John Pepper confirmed that Exxon had notified Brazilian officials of the discovery. Exxon executives were not immediately available to comment, while Petrobras’s press office was closed for a Rio de Janeiro holiday.

BM-S-22 has the potential to be “the most significant wild- cat exploration well in Exxon Mobil’s portfolio,” Neil McMahon, an analyst at Sanford C. Bernstein & Co., said in a note to clients earlier this month. “The company is going back to basics with a renewed focus on exploration.”

The block is one of 13 so-called wild-cat exploration projects that involve wells far from previous discoveries that Exxon is drilling or is scheduled to begin worldwide.

The pre-salt cluster, in the Atlantic Ocean, is part of a region that extends about 800 kilometers along the coast of Brazil from Espirito Santo state to Santa Catarina state. The cluster’s oil has been found in waters as deep as 3,000 meters and as much as 7,000 meters below the seabed beneath a layer of salt.

High Temperatures

BM-S-22 is more than 350 kilometers south of Rio de Janeiro. It was drilled using the “West Polaris” drilling rig, the petroleum agency said.

The oil discovered in areas nearby will take 5 to 10 years to begin producing in large quantities, Gheit said. The fields are also complex and have some of the highest pressures and temperatures that any company has dealt with, he said.

Exxon shares fell $1 to $77.10, while Hess declined $1.12 to $51.86 at 10 a.m. in New York Stock Exchange composite trading. Petrobras preferred shares, the company’s most-traded class of stock, declined 24 centavos, or 1 percent, to 23.59 reais in Sao Paulo trading.

To contact the reporters on this story: Joao Lima in Lisbon at jlima1@bloomberg.net; Jeb Blount in Rio de Janeiro at jblount@bloomberg.net