In what CEO Peter Voser refers to as "one of the largest deep water oil accumulations in the world," Royal Dutch Shell (NYSE: RDS-A ) (NYSE: RDS-B ) , along with four other oil producers, will pay $280 Million for a 35-year contract to begin drilling in the Libra discovery in the Santos Basin, located about 105 miles off the Brazilian coast of Rio de Janeiro, Shell announced today.
According to Shell's statement, Brazil's governmental oil regulator estimates the Libra find has between 8 billion and 12 billion barrels of "recoverable resources."
The consortium, of which Shell is a 20% stakeholder, also includes owner and operator Petrobas with a 40% stake, France-based Total with a 20% stake, and China's CNPC and CNOOC, each with a 10% stake, Shell said in its statement. Shell has a strong presence in Brazil, having generated an estimated 65,000 barrels of equivalent oil a day (boe/d) in 2012.
Reaching the reservoir in the Santos Basin, which Shell tentatively estimates could produce as much as 1.4 million barrels of oil daily, will require ultra-deep water drilling to depths of approximately 11,500 feet below the sea floor.
Regarding the opportunity that the Libra discovery represents, Voser added, "We look forward to applying Shell's global deep water experience and technology, to support the profitable development of this exciting opportunity."
Shell expects the production contract to be signed in November, 2013, and has agreed to complete its "minimum work program" no later than the end of 2017, according to its statement.
In calendar year 2012, Shell produced approximately 3.3 million barrels of oil equivalent daily, and generates 50% of its production from natural gas.