Announcement of Major Find Premature : Brazilian Oil Field Is Still a Hypothesis

When President Jose Sarney announced a major oil discovery on the Amazon River last week, the news touched off an epidemic of “oil fever” in Brazil. But the reports were premature.

There is no oil being produced in the field, the state oil company Petrobras said.

“There was a certain euphoria in the government, but we have nothing concrete yet. The existence of a major field is still a hypothesis,” Petrobras spokesman Carlos Pinto told the Associated Press.

“We have signs of oil, and the geological formation is similar to that of the North Sea. But there haven’t been any tests yet, and we can’t even say if the strike is commercial,” he said.

The discovery was made by the Texaco Exploration Brazil Co., a subsidiary of the U.S. oil company, drilling on Marajo Island, at the mouth of the Amazon River 2,200 miles northwest of Rio.

In late May, an exploratory well in a jungle clearing hit oil-impregnated rock at a depth of 18,100 feet just as technicians were about to give up on the site as a dry hole.

On May 31, Sarney went on nationwide television to announce the discovery of “a region as rich in oil as the North Sea.” With cameras rolling, the president telephoned a Petrobras geologist in Marajo to congratulate him on “this historic event.”

Texaco issued a statement saying it was “too early to evaluate the significance of this discovery.”

If the Marajo strike is found to be commercial, Texaco will receive 35% of the income from sale of the oil for 15 years, after paying 25% Brazilian income tax, Pinto said.

The report and rumors of a super oil field have rekindled a decades-old dream of oil self-sufficiency in this South American country.

Brazil is bigger than the continental United States but traditionally was an oil importer. Still, many Brazilians believed there had to be petroleum somewhere in the mostly unexplored interior.

In the 1970s, Brazil was hit hard by the OPEC oil crisis, which sent petroleum import bills soaring and was widely blamed for raising inflation and the foreign debt, now at $121 billion.

But the country’s fortunes began to improve with the discovery of major offshore fields in the Campos Basin, near Rio. The region now produces some 360,000 barrels a day, or 60% of Brazil’s output.

The government also in 1975 opened vast areas of its territory to risk contract exploration by national and foreign companies. Petrobras has signed contracts worth $1.6 billion, but the only commercial strike was by Pecten, a subsidiary of Shell, which found gas in the southeastern Santos Basin.

Petrobras began exploring Marajo in the 1960s, but 16 test wells came up dry.

In 1984, the company signed a risk contract with Texaco, allowing the company to explore 56,000 square miles near the mouth of the Amazon River. The area later was reduced by half but still covers nearly all of Marajo Island.

Texaco has spent $31 million on exploration so far and must drill three more wells by March, 1990.