Brazil Risk: Much Ado About Nothing

Given that Petrobras (PBR) is now George Soros's single biggest investment, and given that Repsol began drilling the Santos Basin today, it seems to me that the Bolshevik rhetoric from Brazil's Socialists is much ado about nothing and merely hollow words without meaning. Does anyone honestly think Brazil wants to be the next Venezuela?

Sept. 3 (Bloomberg) -- Repsol YPF SA, Spain's largest oil company, started drilling in two projects it operates in the Santos basin offshore Brazil.

The company owns 40 percent of the BM-S-48 and BM-S-55 projects, while Brazil's Petroleo Brasileiro SA holds a 35 percent stake, Madrid-based Repsol said today in a regulatory filing. Exploration will be carried out over the next two years and involve drilling two or three wells.

``The Santos basin in Brazil is one of the zones with greatest exploration potential in the world,'' Repsol said.

Brazil's ``pre-salt'' offshore region may contain about 50 billion barrels of oil, according to Peter Wells, a director at U.K. research company Neftex Petroleum Consultants Ltd. Repsol has stakes in 23 blocks in Brazil's offshore Santos, Campos and Espirito Santo basins, and operates 11 of those projects.

The company has pledged to almost triple profit by 2012 and is trying to increase exploration in countries including Russia and Brazil as it cuts reliance on Argentina. Chairman Antonio Brufau on July 1 said the company will triple investments for developing offshore crude oil deposits in Brazil's Santos Basin to at least $1.5 billion.

Repsol hired Transocean Inc.'s Sovereign Explorer platform for the work, which will start at the Panoramix well in the BM- S-48 area at a water depth of 170 meters (558 feet). The platform can drill as deep as 8,902 meters.

Repsol also plans to drill two appraisal wells in the next year at the Carioca discovery in the Santos Basin, Chief Operating Officer Miguel Martinez said July 31.