Brazil: massive oil discovery on offshore Sergipe

Brazil's government will announce a massive oil discovery off the country's northeast coast later this month, according to acting Sergipe state Gov. Jackson Barreto.

Mines and Energy Minister Edison Lobao will travel to Sergipe's capital, Aracaju, on Oct. 23 to officially announce "the world's largest oil discovery of 2013," Mr. Barreto told Sergipe state's official news agency Friday. The event is also expected to include Magda Chambriard, director of the country's National Petroleum Agency, or ANP, Mr. Barreto said.

The two government agencies, however, downplayed prospects for an announcement. The Mines and Energy Ministry could not confirm Mr. Lobao's visit. In a statement, the ministry added that it "has no knowledge of any new oil discovery in the country other than those already announced by Petrobras."

The ANP, meanwhile, said that Ms. Chambriard would visit Sergipe on Oct. 23 to discuss the upcoming 12th-round auction of oil and natural gas exploration blocks. Ms. Chambriard's visit, though, was not related to any impending announcement of a major oil discovery, a spokeswoman said.

Last week, Brazilian state-run oil company Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras, confirmed it had made a "relevant" discovery off Sergipe's coast that would start production of 100,000 barrels a day in 2018, Chief Executive Maria das Gracas Foster said. The executive declined to give any volume estimates for the oil fields.

Petrobras first announced a series of discoveries in late 2012, saying the finds had opened a "new oil frontier" in the country. The discoveries are closer to shore and could be much cheaper to develop than larger oil fields, known as the presalt, found buried under a thick layer of salt deep under water off Brazil's southeast coast. Billions of barrels of crude have been discovered in the region, and the government plans to auction off a field there known as Libra under new production-sharing agreements later this month. Libra is estimated to hold recoverable reserves of between 8 billion and 12 billion barrels of oil.

The Sergipe discoveries have geologists rethinking their models of the area, where the unexplored shallow-water areas of what's known as the Sergipe-Alagoas Basin were thought to hold between 500 million and 1.5 billion barrels of recoverable reserves. Petrobras's discoveries were made in water 2,500 meters deep.

Petrobras operates the exploration blocks containing the new discoveries with a 60% stake. The remaining 40% stake belongs to IBV-Brasil, a joint venture between Indian companies Bharat Petroleum Corp. (500547.BY) and Videocon Industries Ltd. (511389.BY).