July 14, 2010 / 2:33 PM / 8 years ago

Petrobras faces setback at Libra exploration well

* First exploration well collapsed in underwater salt bed

* Work has commenced on a second exploration well

* Libra’s oil reserves could be higher than Franco’s

SAO PAULO, July 14 (Reuters) - Brazilian state-controlled oil company Petrobras’ first exploration well in the offshore Libra field collapsed inward when the bore reached an underwater salt bed, oil and energy regulator ANP said on Wednesday.

Work already has begun on a second well that is 375 meters (338 yards) from the first site, said the media office of Rio de Janeiro-based ANP, which is also the contractor for the well. Libra is located in the Santos basin, some 230 kilometers (140 miles) off the coast of Rio de Janeiro state in a region known as the subsalt.

ANP is searching for oil reserves that could be used by the government to capitalize Petrobras in an oil-for-shares swap deal that could help it raise up to $85 billion of fresh cash.

The regulator maintained its prediction that Libra’s oil reserves could surpass those at the Franco field, the location of Petrobras’ first subsalt oil discovery with estimated reserves of 4.5 billion barrels of recoverable oil.

Brazil’s discovery of major offshore oil reserves in the subsalt — an area under a thick layer of salt beneath the ocean floor that may hold up to 50 billion barrels of oil — could help the nation become one of the four largest producers of the commodity this decade.

Preferred shares of Petrobras (PETR4.SA) fell 0.2 percent to 27.26 reais in Sao Paulo. The stock has shed about one-fifth of its value this year. (Reporting by Denise Luna, Writing by James Matthews; Editing by Guillermo Parra-Bernal and Walter Bagley)

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