Galp, Petrobras to Seek Oil, Gas Off Portuguese Coast

Petroleo Brasileiro SA, or Petrobras, Brazil’s state-controlled oil company, and Galp Energia SGPS SA, Portugal’s biggest oil company, signed an agreement with the Portuguese government to explore for oil and natural gas off the country’s coast.

The companies will invest as much as $300 million on drilling and up to $3 billion after that if they succeed in finding oil, Petrobras Chief Executive Officer Jose Sergio Gabrielli told reporters in Lisbon today. They may sell oil and gas from the sites for 30 years, they said in a statement distributed to reporters.

Petrobras owns 50 percent of the partnership, and Lisbon-based Galp 30 percent. Partex Oil and Gas, owned by the Calouste Gulbenkian Foundation, Portugal’s biggest private foundation, controls the rest.

If the venture is successful it would provide Portugal with its first commercial oil and gas production. The country is one of the most dependent in Europe on energy imports.

The state will receive 7 percent of the price of each barrel sold and 25 percent of profit through the corporate tax, a ministry spokeswoman said.

For Galp, the partnership is part of a strategy of stepping up exploration and production, an area where it lags behind many of its European competitors. It plans to invest 1 billion euros between 2008 and 2011 on exploration.

The Lisbon-based company and Petrobras are already partners in Brazil, where they are exploring 54 blocs. The two companies also agreed to study a plan to produce biofuels, and expect negotiations on the plan to be completed in July.

Galp will review its own plans for biofuel production in light of this agreement, said Manuel Ferreira de Oliveira, Galp’s chief executive officer.

Galp said its crude production more than tripled to 17,200 barrels a day in the first quarter from 5,200 barrels a day a year earlier. Galp, which ended 2006 with proven reserves of 35.7 million barrels of crude oil, aims to boost production to 20,000 barrels a day by the end of this year.

Portugal currently has no commercial oil or gas production.

Information from: www.bloomberg.com