Shell Makes Brazilian Oil Find - Analyst Blog

Energy major Royal Dutch Shell Plc (RDS.A) informed Brazil’s oil and gas regulator about the discovery of a new offshore oil site in the country’s Santos Basin. Having been drilled to a total depth of 1.25 mile (2 kilometers) below the ocean surface, the well (located in the deep-sea pre-salt concession block BM-S-54) showed indications of hydrocarbons.

The block is situated approximately 125 miles (200 kilometers) off the coast of Rio de Janeiro state. Shell, through its Brazilian unit, has an 80% operating interest in the prospect, the other partner being French oil major Total SA (TOT). The Anglo-Dutch supermajor said that it would continue drilling to 3.7 miles (6 kilometers), following which the company will carry out an analysis of the flow and seismic data from the well.

Brazil has huge pre-salt reservoirs (oil deposits located in the sea bed under thick layers of salt) that lie below the Espírito Santo, Campos and Santos basins in deep and ultra-deep water. These reserves, estimated to hold upwards of 50 billion barrels, are widely thought to be the most important oil find in recent years.

We believe that the BM-S-54 discovery, if rendered economically feasible, will strengthen Shell’s position in Brazil and contribute to its mid-to-long term reserve growth. The Hague-based group is one of the few foreign oil majors producing crude offshore Brazil.

Royal Dutch Shell, which currently retains a Zacks #2 Rank (short-term ‘Buy’ rating), owns one of the largest integrated oil and gas businesses in the world. The group has operations all over the world and is involved in various activities related to oil and natural gas, chemicals, power generation, renewable energy resources and other energy-related businesses.