Friday, July 11, 2008

Drilling Deep And Flying High

Last week's Barron's article: Drilling Deep and Flying High

Brazil's Petrobras could become one of the world's top oil companies if its three new deepwater wells are as plentiful as some expect.

THERE ARE GUSHERS and then there are gushers.

At a time when the oil industry is struggling mightily to find new wells, Brazil's Petrobras is sitting atop what appears to be the Western Hemisphere's biggest find in 30 years. The Tupi oil field, discovered off Rio de Janeiro two years ago and 65% owned by Petrobras, may contain as much as eight billion barrels of oil, an amount that would boost Brazil's reserves by more than 50%.

As if that weren't enough, the company has since found three other potentially lucrative, deepwater wells in the same area. And, with sophisticated operations in the Gulf of Mexico, it could be a big winner in President Bush's new drive to lift U.S. moratoriums on offshore drilling.

All this and high oil prices, too. Can it get any better?

In fact, Petrobras is a singularly tantalizing investment. "Buying Petrobras today is like having the opportunity to invest in Saudi Aramco 40 years ago," says Shawn Reynolds, portfolio manager of Van Eck Global's $1.03 billion Hard Assets Fund. Saudi Aramco, Saudi Arabia's state-owned oil company, today is the world's largest oil corporation in terms of proven reserves and production.

Investors already have struck it rich with Petrobras' stock (ticker: PBR for the American depositary receipts). Recently trading around $70, it has more than doubled over the past 12 months, far outpacing such rivals as ConocoPhillips (COP), Chevron (CVX) and ExxonMobil (XOM). Yet, bulls say the stock could climb another 25% or so within a year, perhaps hitting $90.

"If you're in oil, you have to own this stock," says Robert Levitt, asset manager of $500 million Levitt Capital Management, in Boca Raton, Fla. "They are sitting on the biggest oil find in years, that's why. You don't look at resource companies based on earnings; you look at their oil reserves. Exxon and Conoco aren't making any new discoveries. Petrobras just made the biggest one in years."


Anaconda said...


The Brazilian oil discoveries are an example of the potential for oil exploration & discovery on the continental margin.

This is an area that is just beginning to be explored and already the results are "turning heads" in the oil industry and in the financial community as well.

A good article to review is Tectonic and deep crustal structures along the Norwegian volcanic margin: Implications for the “Mantle Plume or Not?” debate
(available at the side-bar under ICP-MS & Mantle Plumes, listed as Norwegian Volcanic Margin).

This article has graphics as well as discussion on the mechanics of continental margin systems.

There maybe some debate whether the Norwegian margin is analogous to the continental margin off the coast of Brazil, but the piece of evidence which ties the two together in my opinion is that dolomite formations are known to be found in association with the oil deposits in the newly discovered Corioca field off the coast of Brazil.

Conventional geology holds that dolomite is primarily the result of sedimentary action. But there is evidence that dolomite is an ultramafic mineral.

See the following article: Ultramafic-Rock-Hosted Vein Sepiolite Occurrences in the Ankara Ophiolitic Mélange, Central Anatolia, Turkey.

(partial) Abstract:

A 2 m thick brecciated zone containing magnesian minerals is present at the contact of tectonites and cumulates. Tectonites below this zone comprise serpentinized orthopyroxenite and serpentinite. An alteration zone with vein-type bedding comprises four different levels; from bottom to top they are: (1) green-brown serpentinite with dolomite (0.9 m), (2) light greenish-white dolomite with serpentine (0.5 m), (3) white dolomite with sepiolite (0.4 m), and (4) greenish-white dolomite with smectite-chlorite (0.2 m).

Remember a whole mountain chain in Italy is called the Dolomites because it's made up primarily of dolomite.

The temperature and pressure required to produce the alkane series of hydrocarbons (petroleum) as reported by Jack F. Kenney in his scientific paper puts oil in the ultramafic mineral category.

Ultramafics form under ultra high pressure and temperature, and are relatively rare at the surface of the crust.

Per Wikipedia:
Komatiites are ultramafic mantle-derived volcanic rocks. They have low SiO2, low K2O, low Al2O3, and high to extremely high MgO.

Dolomite chemical formula is CaMg(CO3)2, both dolomite and komtiites have magnesium and oxygen and add this piece of evidence per Wikipedia:

True komatiites are very rare and essentially restricted to rocks of Archaean age and most are greater than two billion years old, restricted in distribution to the Archaean shield areas. Komatiites occur with other ultramafic and high-magnesian mafic volcanic rocks in Archaean greenstone belts.

"[H]igh-magnesian mafic volcanic rocks..."

One of dolomite's main chemical elements is magnesium.

Magmas of komatiite compositions have a very high melting point with calculated eruption temperatures in excess of 1600 °C. Basaltic lavas normally have eruption temperatures of about 1100 °C to 1250°C.

Dolomite also has a very high melting point.

Why would petroleum be common in the crustal environment when most ultramafics are rare?

Let me suggest because of petroleum's extreme buoyancy and unique property of having a liquid state in relation to the other ultramafics which are generally solid, so that petroleum "jumps to the front of the line" for transport from the upper mantle to the bottom of the crust. Dolomite, also, is transported to the crust with petroleum because when it is melted it has a very low viscousity so shares a similar property as oil.

Also, dolomite maybe a heat catalyst for hydrocarbon formation in the upper mantle.

It's known that oil companies studied dolomite in the '50s because of the strong association of oil and dolomite.

Anyway, getting back to the continental magin, this is an area where the Earth literally pulled apart in a "rifting" process allowing mantle material including petroleum to travel towards the surface.

One exciting concept, if the Brazilian oil deposits in the continental margin are, indeed, products of vocanic/mantle interactions, would be that oil producing deposits maybe located in procession out toward the mid-ocean ridges because oil's formation and transport on the "flank" of mantle plumes and hotspots, would mean that oil is constantly being formed on the flank of "rifting" formations and other hot spots.

As well, as oil existing as "older" deposits from when "rifting" was occurring in a particular region.

Ultra-deepwater, deep-drilling should be able to give us answers to these tantalizing questions.

And, Petrobras is at the heart of this new "frontier" on the continental margin.

OilIsMastery said...

Thanks Anaconda, great stuff as usual...=)