Petrobras Said to Hit Drilling Snag at Biggest Brazil Find

Petrobras Said to Hit Drilling Snag at Biggest Brazil Find

by Peter MillardSabrina Valle

4:11 PM BRST  February 10, 2015


(Bloomberg) — Petroleo Brasileiro SA halted drilling at its largest oil discovery in deep waters, two people with knowledge of the matter said, underscoring the technical challenges facing the company’s new management team.

An unplanned procedure to retrieve equipment stopped work for more than a week at a well in Libra, the people said, asking not to be named because it hasn’t been made public. Rio de Janeiro-based Petrobras didn’t immediately respond to a request for comment on the incident and if it had been resolved. Commercial production is expected to start in 2020.

While Petrobras expanded output to a record in December at the so-called pre-salt region that holds Brazil’s largest deposits, it has also run into drilling disruptions in the past. In 2010, it abandoned the first well it started at Libra, citing mechanical issues. In 2011, it briefly halted production at the Sapinhoa field in the same region after a pipe ruptured.

The snag shows that the challenges facing Chief Executive Officer Aldemir Bendine extend beyond finance and corruption as he chooses a new management team. The company is deploying the largest fleet of deepwater production vessels in the industry in an effort to boost output and pay down debt. All that as oil trades near six-year lows after an almost 50 percent drop.

Petrobras shares extended a decline to be down 2.8 percent at 9.02 reais at 4:26 p.m. in Sao Paulo.

Bendine started the job Feb. 6 after former CEO Maria das Gracas Foster and five of her executive managers quit amid difficulties reporting graft-related writedowns.

Government Auction

Petrobras took a 40 percent stake in a 35-year concession for Libra, the largest discovery in Brazil’s history, in a government auction in October, 2013. It was the first auction of subsea prospects, known as pre-salt, using a production-sharing model. Petrobras drilled the first well in 2010 on behalf of oil regulator ANP as part of a project to gather data on the region before offering the areas.

Total SA and Royal Dutch Shell Plc each hold a 20 percent stake of the concession while China National Petroleum Corp. and Beijing-based Cnooc Ltd. have 10 percent apiece.

Libra is estimated by Brazil to hold as much as 12 billion barrels of recoverable crude, or 50 percent more than the proven reserves of OPEC member Ecuador. Schahin Petroleo & Gas SA, the owner of the Cerrado drillship Petrobras hired last year to drill two wells at Libra, didn’t immediately respond to an e-mail seeking comment on the rental fees.

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