Karoon inks farm-in agreement with Petrobras for Santos Basin blocks, drilling has begun

By Phaedra Friend Troy

A Brazilian subsidiary of Australian-based Karoon Gas has signed a farm-in agreement with major Brazilian producer Petrobras (NYSE:PBR) for 20 percent interest in two blocks offshore Brazil in the prolific Santos Basin.

Block BM-S-41/S-M 1352 holds the Maruja prospect, and Block BM-S-41/S-M 1354 holds the Quasi prospect offshore Brazil in the Santos Basin.

Under the terms of the agreement and subject to regulatory approvals, Karoon will earn 20 percent interest in both blocks by funding 35 percent of the Maruja prospect exploration well as a part of a two-well drilling program. The Australian firm will then pay its equity share of continued work and reimburse Petrobras for sunk costs.

Promising Prospects

Drilling has already begun on the Quasi prospect, and drilling on the Maruja prospect is scheduled to commenced in September 2010. Results from both exploratory wells are expected by the close of 2010.

Three oil prospects have already been identified on the blocks boasting an estimated 100 million barrels of oil.

Additionally, the prospects are all near existing oil and natural gas infrastructure, which would speed development of any discoveries. 

The recent Petrobras discoveries of Tiro and Sidon on Block BM-S-40 are just 16 kilometers away from the Maruja prospect. Petrobras has already begun production from the Tiro oil field via an extended well test, and the company has filed a development application with regulatory authorities.

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