BG Group to invest $20 billion in Brazil sub-salt oil

RIO DE JANEIRO, Nov. 20 (UPI) -- U.K.-based BG Group plans to invest $20 billion in Brazil's ambitious sub-sea oil and gas exploration and development projects that are likely to put the country on the map as one of the largest producers of hydrocarbons.

A BG Group spokeswoman confirmed the deal after BG Group President in Brazil Nelson Silva announced plans for the investment over 10 years.

The BG group funding, although substantial, is small when compared with Brazil's plans to spend $174 billion on sub-salt oil and gas development over the next five years to speed oil and gas production from the area.

Silva explained BG Group took decision to invest in the project because Brazil will be responsible for one-third of the total oil and gas to be produced in the world.

BG Brazil and Petrobras, the state-managed Brazilian energy conglomerate, formalized the creation of a joint venture to develop Front End Engineering and Design. FEED aims to build a floating craft for liquefaction of natural gas in the pre-salt Santos Basin.

Brazil has been developing expertise to drill through the seabed but still has to develop enabling technologies to facilitate transfer of oil and gas from the deep wells directly to sea-going vessels, including tankers for oil and liquefied natural gas.

The great distances between the newly discovered oil wells and Brazil's shore have discouraged planners from considering pipelines connecting offshore production to onshore reception and delivery.

GB Group is involved in seven exploration blocks for oil and gas, with about 20 percent share of the fields that Petrobras operates in the pre-salt region.

The prospect of Brazil being catapulted into the big league of oil producers -- without having anything to do OPEC -- has pushed both the government and the legislature into action to ensure Brazil's overall control even when foreign partners become involved.

The lower house of Congress approved a new law creating a state holding company, Petrosal, to manage new projects in the sub-salt oil reserves. Brazil has said it wants to choose its partners on its own terms.

A BG Group spokeswoman told United Press International the group was following the progress of new legislation through Brazilian Congress.

"We welcome the assurances that existing contracts will not be affected," she said. "BG values the investor climate that Brazil has developed. Contract stability, particularly where companies have assumed considerable risks and technical challenges, is a key principle."

The BG Group has core operations in Australia, Brazil, Egypt, India, Kazakhstan, Trinidad and Tobago, Tunisia and the United States, plus smaller operations in a dozen other countries.