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FRIDAY, 05 NOVEMBER 2010 19:11 î
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  Brazil's National Petroleum Agency (ANP) said the

country's offshore Libra subsalt oil discovery could hold as much as
15 billion bbl of oil²a figure 2.4 billion bbl greater than the
country's existing reserves.

"The volume of recoverable oil belonging to the nation could vary

from 3.7-15 billion bbl, with the most likely estimate being 7.9 billion
bbl," ANP said, citing a study carried out by certification firm
Gaffney, Cline & Associates.

"It's important to stress that the Libra prospect alone could hold
recoverable oil volumes that exceed Brazil's current proven
reserves," ANP's statement said. According to OGJ figures, Brazil
had 12.6 billion bbl of proved oil reserves in 2009, second-largest
in South America after Venezuela.

ANP further said the well currently being drilled in Libra has
reached a depth of 5,410 m, of which 22 m is in the presalt layer.
According to ANP, the well is eventually expected to reach a total
depth of 6,500 m before it is completed.

Some skeptical
Analysts expressed a certain degree of skepticism about ANP's
estimate, especially as it was based on the results of a single
well²and one that has not yet reached total depth.

Ruaraidh Montgomery, senior analyst for Latin America upstream

research at Wood Mackenzie, noted, "It's a very large volume that
they've announced based on just a single well, in this case a well
that is still being drilled."
Analysts BMI and IHS Global Insight shared Montgomery's view
regarding the narrow base of data supporting ANP's estimate. Still,
both groups were fully prepared to underline the potential
represented by the single well.

"That the estimate was provided based on a single unfinished well

at the prospect is reason for caution," said BMI, adding, "The report
does seem to provide plenty of support for those who say Brazil's
subsalt oil province could hold tens of billions of barrels of oil."

IHS Global Insight concurred, saying that the latest reserve

estimates for the Libra prospect should be treated with "some
caution" as the highly prospective nature of the find is evident from
the wide difference between the upper and lower estimates
released by the ANP.

"Nonetheless suggestions that the new find could be as large as

Tupi or perhaps even larger should ensure that it continues to be
watched with interest," the analyst said.

Timing questioned
A certain degree of skepticism over the find also emerged as a
result of the timing of the ANP's announcement, coming just as
Brazilians were voting in a presidential runoff election after weeks
of campaign rhetoric over the future of the country's oil reserves.

On Nov. 1, Dilma Rousseff, a protege of outgoing Brazilian

President Luiz Inacio Lula da Silva, won the election with 56% of
the vote. At the top of the new president's agenda are proposed
changes to an oil law that will give the government more control
over production in the subsalt layer.

A year ago, Rousseff described the new oil law as a new

development model that would enable her country to ward off a
future "oil curse."

"Blessed with the world's largest oil discovery in 30 years, Brazil

has recently proposed a new development model designed to turn
this unexpected windfall towards the public good rather than the
curse it has become for other nations," Rousseff said (OGJ, Nov. 9,
2009).

But she and other Brazilians may have to wait a bit longer for the
bill to become law as the leader of the governing coalition's forces
in the Chamber of Deputies, Candido Vaccarezza warned earlier
this week that approval of the bill may not come until next year.

The bill, which contains proposals to create a social fund to hold

future revenues from the pre-salt layer as well as a new production-
sharing agreement model for areas not already under concession,
has gone back to the Chamber of Deputies after the Senate
combined two of the government's presalt proposals.
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