BG Group boosted by massive upgrade to Brazilian reserves

(BLOOMBERG)

BG Group buoyed investors yesterday with a surprise upgrade in estimates for reserves in its Brazilian oil fields, which could be worth up to an additional £4bn to the British exploration company. Alongside the discovery of its three Brazilian oil fields, BG Group posted a profit of $978m in its third quarter, compared with City estimates of $851m.

BG raised its forecasts for the company's share of recoverable oil from the Tupi, Iracema and Guara in the Santos Basin, off the coast of Brazil, to 2.8 billion barrels of oil equivalent (boe) from an initial estimate of 2.1bn boe. BG holds a 25 per cent stake in two of the fields, while it has a 30 per cent shareholding in Guara.

According to checks by an independent firm, the three fields in total are now thought to hold 10.8 billion boe, a 34 per cent jump on an initial forecast of 8.1 billion.

Last week, BG revealed it hadestablished its first permanent floating production, storage and offloading vessel at the Tupi oil field, able to deliver 100,000 barrels of oil per day and up to 177 million standard cubic feet of gas.

BG's chief executive, Frank Chapman said: "We have made significant progress in the delivery of our growth plans for the decade ahead. In Brazil, we have brought on stream the first Tupi permanent facilities and we have announced a very significantresources upgrade on the Tupi,Iracema and Guara fields."

The City had previously conservatively estimated the oil in the three fields to be worth $5 a barrel. But this has now been revalued at $9 a barrel, based on the price at which the Spanish oil and gas company Repsol sold part of its stake in the field to the Chinese refiner Sinopec last month.

Given the extra reserves identified by BG, this price would be worth an additional £4bn to the British oil and gas explorer.

In October, Repsol and China's Sinopec agreed to develop the projects of Repsol Brasil, the subsidiary of Repsol in Brazil, to create one of Latin America's largest energy companies, valued at $17.78bn.

For its third quarter, BG said its total production volumes of 56.4 million barrels of oil was marginally down on the 56.6 million last year. But total operating profits, including the share of pre-tax results from joint ventures, surged by 21 per cent to $1.67bn.

The third-quarter results capped a strong week for BG. On Sunday, the group received the green light from the Australian federal and state government to the first phase of implementing the Queensland Curtis Liquefied Natural Gas project.

Shares in BG rose by 41.5p to 1,252p.