First Reserve pumps $500m into Brazil company

The energy-focused firm is investing in an oil and gas exploration and production company in Brazil.

First Reserve is investing up to $500 million in Brazil-based Barra Energia, a newly-established independent exploration and production company.

The firm is making the investment from its 12th private equity fund, which closed on about $9 billion last year.

Barra, which is led by executive chairman Joao Carlos de Luca and chief executive officer Renato Tadeu Bertani, was looking for an equity infusion to help it get established. First Reserve had been looking to make an investment in a Brazil-based oil and gas exploration and production company.

“We’ve been attracted to Brazil for quite some time,” Will Honeybourne, a managing director with First Reserve, said in an interview. “Brazil has large resource potential relatively unexplored and underdeveloped. The economy is growing, the regulatory regime is attractive.”

Brazil discovered in the last few years huge untapped deep sea oil fields under layers of ocean, rock and beds of salt. Oil fields beneath the salt fields are known as pre-salt, while oil above the salt is called post-salt. Energy companies have been jockeying for a piece of the reserves, which could turn Brazil into one of the largest producers of oil in the world.

Barra will initially focus on the post-salt, shallow water oil as opposed to the pre-salt layers, which is where the bulk of investors’ attention in Brazil is right now, Honeybourne said. “We are in a way counter to the industry,” he said.

The company may look to those opportunities in the deepwater pre-salt fields in the future, he said.

First Reserve will continue looking for opportunities in Brazil, whether in indigenous Brazilian companies or in portfolio companies expanding operations into the country, Honeybourne said.