French energy company Total signs mega-deal to gain access to oil reserves off the coast of Brazil. Photo by Pepj/Shutterstock
PARIS, Dec. 22 (UPI) -- French energy company Total said it was building up its prospects in South America in a partnership that gives it access to some of Brazil's biggest oil fields.
In a deal valued at $2.2 billion, the French supermajor gained access to two of Brazil's largest oil fields in an acquisition of interests from state-supported Petroleo Brasileiro, known more commonly as Petrobras.
Both sides already work together on assets in the U.S. waters of the Gulf of Mexico and in the giant Libra oil field off the coast of Brazil in the so-called Santos basin. Total gets a tighter hold over the prolific Santos basin, while Petrobas has the option to take on more interest in deepwater exploration off the coast of Mexico.
"These agreements will reinforce Total's position in Brazil through access to outstanding pre-salt resources," Total Chairman and CEO Patrick Pouyanne said in a statement.
A report early this week on prospects in the current oil economy from consultant group Wood Mackenzie found the oil reserves off the coast of Brazil are among the "hot oil plays." Oil basins there are referred to as pre-salt because the the oil is below a thick layer of salt on the ocean floor.
An estimated 50 billion barrels of oil lies off Brazil's coast, a volume that's expected to put the South American country on par with some of the world's top oil producers.
In commenting on the deal for Total, Valentina Kretzschmar, the corporate research director at Wood Mackenzie, said the French company is announcement a strategic comeback of sorts following a period of deep cuts.
"Pre-salt deepwater Brazil offers access to low-cost, long-life resources, and will help shift Total's portfolio to the lower end of the cost curve - in line with the company's strategy," she said.
For Petrobras, the deal comes as it struggles through a weak oil economy and concerns about corruption. The company last year said it aims to move past a "sad chapter" after taking a massive loss in a graft scandal.