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Exxon Mobil’s Azulao-1 well tapped a reservoir that could contain 8 billion barrels of recoverable oil, said Luiz Lemos, a partner at TozziniFreire Advogados, a Brazilian law firm that represents foreign energy companies with projects in the South American nation.

The size of the discovery will intensify interest in Brazil’s offshore region among U.S., European and Chinese producers amid a dwindling supply of untapped oil basins outside the Persian Gulf and Russia, said Lemos, a former general counsel for a unit of Brazil’s state oil company, Petroleo Brasileiro SA.

“This is very huge,” Lemos said yesterday in a telephone interview from Rio de Janeiro. His firm’s clients include Irving, Texas-based Exxon Mobil, Norway’s StatoilHydro ASA and Devon Energy Corp. of Oklahoma City.

Exxon Mobil, which pumps more crude than every member of OPEC except Saudi Arabia and Iran, in January announced the discovery of petroleum in the Azulao-1 well in an offshore region designated BM-S-22. The company operates the project on behalf of partners Petroleo Brasileiro, known as Petrobras, and Hess Corp.

Petrobras triggered a flood of interest in Brazil’s offshore crude deposits with the November 2007 announcement that Tupi may hold the equivalent of 8 billion barrels of recoverable oil. That would make it the largest find in the Americas since Mexico’s Cantarell field was discovered in 1976.

Drilling Guarani

A floating drilling rig began boring a second well, called Guarani, into the reservoir in BM-S-22 earlier this week, said Patrick McGinn, a Houston-based spokesman for Exxon Mobil.

“We have no idea how big it is,” McGinn said yesterday in a telephone interview. “We’re nowhere near that yet. It’s premature to speculate until all of the appraisal work has been done.”

Jon Pepper, a spokesman for New York-based Hess, referred inquiries to the field’s operator, Exxon Mobil. Rio de Janeiro- based Petroleo Brasileiro’s investor relations department didn’t respond to an e-mailed message seeking comment. Exxon and Hess each own 40 percent stakes in the field and Petrobras owns the other 20 percent.

Exxon Mobil Chief Executive Officer Rex Tillerson last week said oil from Brazilian fields in the area around Tupi probably won’t begin flowing onto world markets for years because of technical challenges and harsh operating conditions.

‘Huge Potential Resource’

In a March 5 presentation to investors and analysts in New York, Tillerson described his company’s discovery as “a huge potential resource.” He declined to go into more detail, saying too little is known about the geology and characteristics of the formation to make estimates.

Tapping Brazil’s new discoveries will be more challenging than extracting crude from giant onshore fields such as Saudi Arabia’s Ghawar, the world’s biggest, Tillerson told analysts last week.

At current energy prices, 8 billion barrels of oil is worth about $380 billion, which exceeds the economic output of Taiwan, South Africa and Ireland.

The Brazilian prospects cover an area the size of the U.S. state of Florida about 170 miles (274 kilometers) offshore under more than 16,000 feet of water, rock and salt, Lemos said. The region will require $500 billion in investments over the next few decades for pipelines, production platforms, gas-processing plants and other infrastructure, he said.

Tillerson, entering his fourth year as the head of the world’s largest oil company, expects to boost production by 2 percent this year to the equivalent of 4 million barrels of crude a day.

Searching for Oil

Exxon Mobil is spending $79 million a day this year to search for oil fields, construct platforms and renovate refineries. The company had $45.2 billion in profit last year, the highest in U.S. corporate history.

Tillerson, a 56-year-old University of Texas-trained engineer, is expanding the search for untapped reserves after production tumbled last year to the lowest since Exxon Corp.’s 1999 purchase of Mobil Corp.

Exxon Mobil fell 2 cents to $67.13 as of 10:42 a.m. in New York Stock Exchange composite trading. The stock has dropped 16 percent this year.

Hess, the best performer in the 13-company Amex Oil Index this year, rose $1.83, or 3.1 percent, to $60.85. Petrobras rose 1.2 percent to 27.88 reais in Sao Paulo.

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net.

Last Updated: March 13, 2009 10:44 EDT