Massive oil find off Brazil sends BG shares up 5%

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The Independent Online

Shares in BG Group rose by more than 5 per cent yesterday as it emerged that an oilfield discovered last year off the coast of Brazil could turn out to be the world's third largest.

The exploration company owns a 30 per cent share in the consortium exploring the Carioca field, part of the Santos basin, a potentially huge oil resource 7km beneath sea level in the South Atlantic.

The surge in BG's share price was prompted by Haroldo Lima, head of Brazil's national oil agency, who told an industry conference that Carioca could contain as much as 33 billion barrels of oil, almost three times the country's existing reserves.

Petrobras, the Brazilian state-owned oil company, which owns 45 per cent of Carioca, urged caution. While all four wells drilled so far in the field have produced positive results, Petrobras said further appraisal was needed before an accurate estimate of Carioca's contents was possible. Oil extraction may not take place for another decade.

Brazil's stock exchange regulator also warned investors in Petrobras to take care – the company's shares rose by 5.6 per cent yesterday – cautioning that the comments could prove to be "harmful" to shareholders. Mr Lima's colleagues said that his comments reflected unofficial reports, rather than accurate estimates.

A BG spokesman said: "The Santos basin has the potential to be a material hydrocarbons reserve but further appraisals need to be made."

Nevertheless, the potential scale of Carioca caused excitement among oil investors. The Carioca field is a separate development to Tupi, another resource in the Santos basin, which Petrobras believes may contain 8 million recoverable barrels of oil. BG owns a 25 per cent share in Tupi.

David Thomas, an oil analyst at Citigroup, said that if Carioca really contained 33 million barrels, it was reasonable to estimate that 10 million barrels would be recoverable, which he said was "still massive in any context".

The Santos basin presents a significant challenge to developers. It is 2km below the seabed, underneath a layer of salt, in an area of the South Atlantic that is around 5km deep. However, Petrobras is renowned for its deep-water drilling abilities.

Shares in BG closed 5.4 per cent up at 1,288p.