Huge offshore oil discovery (updated)

Bloomberg brings news of a huge new oil field discovered off Brazil in the Santos Basin. Petrobras, the Brazilian oil company says that tests indicate a size of between 5 and 8 billion barrels of oil and gas. At current prices, that amounts to a large fraction of a trillion dollars' worth of oil.

Hugo Chavez will not like this news. Nor will others who benefit from high oil prices. Nor will fans of the "peak oil" theory, which holds that all the good discoveries have been made and oil production is doomed to decline. This find was deep, in the subsalt layers, and best of all, Petrobras is encouraged at the potential of other parts of the Espirito Santo, Santos and Campos basins, in their subsalt layers. 

The new field joins the discovery last year in the Gulf of Mexico of another huge deep-lying field by the "Jack 2" oil drilling rig, estimated to contain between 3 and 15 billion barrels of oil and gas. The technological advances in drilling deep offshore (and onshore) and the emerging potential of deep oilfields hold out hope of expanding the supply of oil, contrary to the doom and gloom that has become conventional wisdom, and which supports high oil prices.

Update: Leonard Herchen of Calgary, Canada writes:

As is all to common, the Bloomberg article appears to be unable to distinguish "oil in place" and "reserves". A field that "contains" 8 Billion Barrels, is indeed a very large, world class discovery. However, only a fraction of that will be recoverable. Depending on the rock and fluid properties, it will probably range from 20 to 60%. Assuming 40% is recoverable, that would be 3.2 billion barrels of reserves. This is large, but it is not correct to compare reserves with oil in place.