Price of unexploited oil

In Energy on 27/09/2010 at 5:24 am

If like me you ever wondered about the value of oil in the ground, it’s US$8.51a barrel.  Granted this valuation is about oil that is hard to extract: 350km offshore, up to  7km below the surface in the southern Atlantic Ocean, under deep water and massive layers of rock, sand and  salt.

Analysts think that US$6 a barrel is a fair price for this oil, given the difficulty of extracting it. But Brazil has sold the oil to Petrobras (Brazil’s government owns 40% and a majority of voting rights) at US$8.51 a barrel (42%)  price. It will get more Petrobas shares.

The minority shareholders hated this but gritted their teeth and took up their shares in Petrobas capital raising exercise.

that stock worth around $70 billion had been taken up—a world record, and more than three times the size of Agricultural Bank of China’s giant share offer two months ago. Of that total, almost $43 billion-worth of the shares will be taken up by the government in return for giving Petrobras the right to develop 5 billion barrels of reserves.

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