By Andrei Khalip - Analysis
RIO DE JANEIRO (Reuters) - Brazil’s growing oil output and prospecting are turning it into a key source of new crude in the Western Hemisphere, but whether this will bring a tangible increase in exports remains to be seen.
Analysts say any serious increase in petroleum exports would depend on economic growth in Latin America’s largest country, now picking up steam after years of stagnation and crises. Brazil achieved self-sufficiency in crude last year and is slowly growing as a net exporter.
“If Brazil really starts growing at higher rates, maintaining self-sufficiency may become quite a challenge, and that is clearly the government’s priority,” said Francois Moreau, head of Estrategia e Valor consultancy in Rio.
Brazil’s state oil company, Petrobras (PBR.N), projects its crude output in Brazil should reach 2.37 million barrels per day in 2011, up a steep 27 percent from this year’s planned 1.86 million bpd, and then rise to 2.81 million bpd by 2015.
Meanwhile, the central bank expects the economy to expand 4.7 percent this year after a 3.7 percent rise in 2006. The government wants growth of 5 percent or more in the years to come.
Experts say that would require yearly oil and fuels output to rise by more than 5 percent, so Petrobras’ ambitious output growth plan is just about enough to meet that demand.
In the first quarter, Petrobras’ exports of oil and fuels exceeded imports by 187,000 bpd, a 156 percent rise from a year earlier. Petrobras exported 377,000 bpd of crude and imported 340,000 bpd. Imports of lighter crude are needed to mix with heavy local oil at the refineries, but Brazil has been upgrading factories to process more local petroleum.
In the meantime, planned start-up of shallow-water Polvo field by U.S. company Devon Energy Corp. (DVN.N) in the next few days is about to open a new stage of oil expansion in Brazil, making the company the first foreign producer not associated with Petrobras.
Analysts say high world oil prices, new technologies and Brazil’s economic and political stability have pushed the country from a second-tier oil province a few years ago into a booming producer with strong prospects.
“The prospects in terms of production are very positive -- previously it was a challenging environment from a technical point of view, but Petrobras expertise and technology changed that,” said Ruaraidh Montgomery, a Brazil analyst with Wood Mackenzie consultants in Edinburgh.
Most of Brazil’s oil is heavy, found at great depths.
“Many new projects are coming up, Petrobras is ramping up production from bigger fields like Roncador, Jubarte and Marlim Sul ... and bit by bit, foreigners are becoming important, although they are still small compared to Petrobras,” he said.
Petrobras expects to add two 180,000 bpd rigs on Roncador alone in September. The Campos basin field pumped 84,000 bpd in 2006 and should peak at 488,000 bpd in 2014.
Brazil’s oil reserves about doubled in the last 10 years to some 11 billion barrels, as did output, at 1.8 million bpd.
Foreign oil companies, now pumping around 70,000 bpd, should hit a combined output of up to 290,000 bpd in 2011, most of which is likely to be exported. Chevron Corp. (CVX.N), Anadarko (APC.N) and Statoil are among the oil majors preparing to start producing in Brazil. International oil companies started working in Brazil after the 1998 opening of its oil sector.
Sophie Aldebert, associate director at Cambridge Energy Research Association, expects Brazil to be among the world’s top 10 sources of growth in net oil production capacity in the next 10 years, to a big extent thanks to “stable, attractive above-ground conditions,” which distance Brazil from the largely unstable and less-accessible Middle East.
Recent Petrobras discoveries of light oil in sub-salt clusters below the producing layers in Campos basin, as well as in the new prolific basins of Espirito Santo and Santos, are also seen as encouraging, although these are yet to be proven economically viable with well costs up to triple the average.
“We do not envisage any sub-salt production for at least another five years ... But the potential is massive -- multibillion-barrel in scale,” Montgomery said.
The challenge of rising costs is considered important, but experts said it is a global trend. They expect oil recovery in Brazil’s deep waters to remain attractive if oil prices stay above $50 a barrel, while prices at present are past $70.