Riesgo al agua profunda.

• Author: Kepp, Michael
• Position: Producci

Texaco is making a billion-dollar bet on Brazil to boost its maturing reserves--and keep its shareholders happy.

From his perch inside a glass skyscraper, Antonio Pinho, vice president of exploration and production for Texaco's Brazilian subsidiary, Texaco do Brasil, has a panoramic view of the cube-shaped monolith that houses state-owned oil company Petrobras.

But Pinho, a slight and bespectacled former geologist who's been with Texaco for 25 years, no longer has to peer out his window at his neighboring competitor, wondering what its next move will be. Texaco and Petrobras recently became partners in their search for new oil deposits, and Pinho is confident that the partnership will greatly boost the U.S. firms own maturing reserves. "The name of the game is building potential reserves to provide the revenues your shareholders want," he says.

His self-assurance is reflected by Texaco's investing more capital to enter Brazil's exploration and production sector than any other company since the government ended the half-century-long Petrobras monopoly two years ago.

Texaco was the leader of a consortium--also involving Petrobras--that will spend an initial US$1.2 billion to develop the deepwater Frade field where Petrobras has already discovered oil. The Frade field is located in the Campos Basin, Brazil's largest oil-producing region, which accounts for 75% of the country's output and boasts some of the world's highest offshore production rates. Frade, to be Texaco-operated, is expected to produce 100,000 barrels of oil per day by 2003, nearly 10% of Brazil's current oil output and just over 10% of Texaco's current worldwide output.

The Frade field is in the yet-undrilled offshore area closest to Petrobras's most recent major discovery--the Roncador "giant" field in the Campos Basin with an estimated 2.7 billion barrels of reserves. And Roncador isn't far from the Campos Basins other two biggest-producing fields, Marlim and Barracuda, both of which were discovered in 1985.

Pinho says that oil companies constantly weigh risk versus investment. But he adds that Texaco has committed a sizable amount of capital in Brazil because discoveries of giant fields like Roncador greatly decrease rise "There aren't many Roncadors, Marlims and Barracudas discovered within such a relatively short time period in any world [geological] basin;" he says.

Texaco's faith in the Campos Basin also led the U.S. major to join an Exxon-led consortium--also involving...