BG Group more than doubled the estimate of its oil and gas reserves in Brazil yesterday, sending the resources group's stock soaring nearly 5 per cent.
The Santos Basin off the coast of Rio de Janeiro has long been a jewel in BG's crown, after an unprecedented string of exploration successes in its "pre-salt" floor in recent years.
BG is now estimating that its holdings have a mean net potential of 6 billion barrels of oil equivalent (boe) in the region, twice the 3 billion boe estimated in the company's most recent strategy presentation, in February.
BG's chief executive Sir Frank Chapman – who was knighted for "services to the oil and gas industries" in the Queen's Birthday Honours list last month – described the upgrade as "significant" yesterday.
"The doubling of our estimated Santos Basin mean reserves and resources demonstrates the continued rapid evolution of our understanding of these enormous discoveries," he said.
Under its fast-track development programme, BG's production capacity in the region is set to grow steadily to more than 2.3 million boe per day by 2017. "I believe this – alongside progress with major ventures in Australia, the US and across our global portfolio – will transform the scope, scale and value of BG Group," Sir Frank said.
Analysts at Evolution Securities, who reckon BG's Brazilian assets are worth 1,000p a share, said the upgrade could increase this by 280p per share. BG shares closed up 64p at 1,414p.
The company has interests in five blocks in the Santos Basin, held in partnership with other major oil companies including Brazil's state-owned Petrobras, and Repsol YPF Brasil. The biggest reservoirs so far are at the Lula/Cernambi fields, which are estimated to hold a total of between 7 and 11 billion boe. Meanwhile Iara holds an estimated 3 to 4 billion boe, and Guara between 1.5 and 2 billion boe.
BG Group's latest estimates of its own portion of the reserves comes from analysis of the latest data from appraisal activity including drill stem tests and extended well tests indicating stronger-than-expected productivity and better links between reservoirs.
While the scale of the Santos Basin fields is not in doubt, getting the oil and gas out will not be easy – or cheap. The finds are in so-called "ultradeep water", deep in rocks lying under more than 2,000 metres of Atlantic ocean. Trickier still, the oil and gas is buried another 3,000 metres under the sea floor, hidden from traditional seismic imaging by a thick layer of salt in the rock above.