State-controlled oil giant Petrobras said it found "good quality" petroleum in a well in the deepwater Santos basin off Brazil's Atlantic coast.

The reserves are in the third well in a field located 320 kilometers (199 miles) off the southeastern state of Sao Paulo in the pre-salt layer, which is estimated to contain billions of barrels of oil equivalent and could potentially transform Brazil into a major crude exporter, Petrobras said.

The crude was found at a depth of 2,202 meters (7,220 feet) in the Sapinhoa field, Petrobras said.

The contract between the government and Petrobras allows the production of up to 319 million barrels of crude in the area.

Drilling has reached a depth of 5,058 meters (16,583 feet) "to determine the low-end limit of the reserves and identify the total thickness of the area of interest," Petrobras said.

The 2010 contract between the government and Petrobras establishes the operating terms for the pre-salt layer, which is found beneath the sea bottom and contains a gel-like deposit of salt that could be up to two kilometers (1.24 miles) deep.

A law signed in 2010 declares the pre-salt reserves to be state property and stipulates that they will be explored and developed by consortiums in which Petrobras will have a minimum 30 percent stake.

The legislation established a production-sharing model in which the consortiums must give the Brazilian government a percentage of the extracted crude. They will also be required to make royalty payments.

Under the legislation, Petrobras is the operator of all projects and also can be awarded exploration contracts without a competitive bidding process. EFE