BG Group Plc. will prospect for oil in Brazil's Santos Basin in the newly discovered Tupi oil field, where up to 8 billion barrels of oil is believed to be below the ocean floor.
According to Brazilian energy officials, BG Group Plc. has a 25 percent stake in the area being drilled, while Brazil's state-owned energy giant Petrobras controls 65 percent of the block. The remaining partner in the project is the Portuguese firm Galp Energia.
BG Group has played a major role in the development of the Santos Basin, home of the Tupi oil field, which was first discovered in 2006.
In August 2008 the British firm discovered a new deposit in the basin and began exploratory drilling a month later. At the time, BG Group Chief Executive Frank Chapman lauded the find, saying, "The exceptional sequence and scale of our drilling success in this area reflects the world-class status of the pre-salt Santos Basin."
While the BG Group and Petrobras are close partners in developing the Tupi Field, the two companies have varied publicly on the site's output potential.
Last year BG Group officials said they believed the Tupi Field would produce 1 million barrel per day when developed. Petrobras officials, meanwhile, have refused to comment on the site's production capacity.
The BG Group's influx of capital into the Brazilian petroleum sector comes at an ideal time for the development of the country's offshore fields, as many other foreign investors are waiting to see how the global economy performs in the coming months, according to Brazilian energy experts.
Last month a round of bidding on Brazilian oil and gas exploration rights earned less than $40 million for the Brazilian government.
Though Brazilian energy officials hailed the auction as a success, revenue generated from the bidding fell far short of last year's auction, which brought in about $900 million. Far fewer lots were sold in 2008, noted experts, who also speculated that Brazil's slowing economy following several years of exceptional growth -- coupled with the sharp decline of oil prices in recent months -- has most international oil firms holding investment until at least 2009 and perhaps beyond.
Investors likely are waiting for new legislation governing the oil and gas sector, expected sometime this year. The new legal framework will redefine the terms for producers waiting to start work on major discoveries that shocked the oil industry in recent years.
Future investors in oil and gas exploration could see higher taxes and other new regulations for Brazilian waters.
Brazil's political leaders are angling for the government profits from the future oil production, which is holding up the law as well.
While the projected reserve is large -- about 55 billion barrels -- off Brazil's coast, profit will depend on the difficulty in accessing the hydrocarbons, a project already expected to be beyond $100 billion.
Yet amid the uncertainty and downturned economy, Petrobras reported Tuesday that it has set a monthly record in December for oil exports, averaging 620,000 barrels per day, with the U.S. market accounting for more than 60 percent of the exports.