Offshore discovery could make Brazil major oil exporter

SAO PAULO, Brazil -- A monster offshore oil discovery could help Brazil join the ranks of the world's major exporters, but full-scale extraction is unlikely until 2013 and will be very expensive.

Petrobras, as it is known, will start pilot pumping in 2010 or 2011 but full production would take several more years, Estrella said late Thursday.

After soaring 26% in New York Thursday on news of the find, Petrobras stock opened more than 7% higher Friday on Sao Paulo's Bovespa exchange.

Getting the oil out will be an expensive and formidable challenge because the oil is so deep. The lag time before production means any impact on world oil prices won't come soon.

Petrobras, however, is well-known for its experience in extracting oil from extremely deep offshore reserves and is widely regarded as one of the planet's best-run state oil companies.

Tapping the Tupi field will cost billions of dollars, but Petrobras is flush with cash for strategic investments because of growing production and high international oil prices.

The Tupi field lies under 7,060 feet of water, almost 10,000 feet of sand and rocks, and then another 6,600-foot thick layer of salt. The company drilled test wells that lie under 7,100 feet of water, 177 miles south of Rio de Janeiro.

Bear Stearns analyst Marc McCarthy estimates the value of the oil in the block at $25 billion to $60 billion depending on international prices.

Tupi "is immense and marks the beginning of a new horizon for Brazil," he said in a note to clients.

"We are sure the question will arise — will Brazil join OPEC?" McCarthy wrote. "But more importantly, it has established an aura of optimism for massive future exploration success."