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Brazil on track to become world's fourth-largest oil producer
2023/6/15
For nearly two decades, Brazil, South America's largest economy, reaped huge economic benefits from a massive oil boom that began with the first offshore ultra-deepwater sub-salt discovery in 2006. That oil boom then nearly collapsed when Petrobras (Brazil's national oil company/Petrobras) was saddled with huge debts and almost forced to declare bankruptcy. Since then, industrial reform and rationalization coupled with high oil prices have reinvigorated Brazil's ongoing massive fossil fuel boom. There are signs that Brazil is becoming the fourth largest oil producer in the world, which will bring huge benefits to the Brazilian economy.
Data released by ANP, Brazil's hydrocarbon regulator, show that in April of this year, Brazil produced an average of 3.1 million barrels of oil per day. This figure is almost 1% more than the previous month and 5% more than the same month last year. Brazil's total hydrocarbon production in April this year was just over 4 million barrels of oil equivalent per day, up 1.1 percent from March and 4.4 percent from the same month last year. These figures represent a modest recovery after the plunge in March of this year. This increase indicates Brazil's potential to become the world's largest oil producer, especially as it is expected to increase its oil production by 300,000 barrels per day by the end of this year, reaching 3.4 million barrels per day by the end of the year.
Last year, Brazil ranked ninth in the world in terms of oil production, surpassing Kuwait with an average oil production of just over 3 million barrels per day. Assuming that Latin America's largest economy will become the world's fourth-largest oil producer, in which case Brazil would need to extract more than 4.5 million barrels of oil per day to surpass Canada, which currently holds first place. The Brazilian Ministry of Energy expects Brazil's oil production to reach 5.4 million barrels per day by 2029, 80 percent higher than last year's 3 million barrels per day. The continued year-over-year increase in Brazilian hydrocarbon production suggests that Brazil has real potential to expand its oil production and become the fourth largest oil producer in the world.
Another key factor supporting these plans is Brazil's abundant hydrocarbon reserves. According to data released by ANP, the largest oil producer in Latin America had proven oil reserves totaling 14.9 billion barrels as of the end of last year, 77 percent of which were subsalt reserves. There were also 21.9 billion barrels of proved and probable reserves and 27 billion barrels of proved, probable and possible reserves. This indicates that Brazil has considerable hydrocarbon potential and the reserves needed to support a significant increase in oil production. These reserves will continue to grow as exploration and development drilling activity increases, and the international rig count in service released by Baker Hughes shows an increase of 17 rigs in service in Brazil by the end of May this year, compared to 11 rigs in the same period last year.
The huge leap in oil production will be driven by the expansion of sub-salt oil production, which the Brazilian Ministry of Energy believes will eventually account for 80 percent of Brazil's total hydrocarbon production, compared to the current figure of about 77 percent. Achieving this goal will require a significant increase in production, which can only be achieved if energy investment and drilling activity expand significantly. The Brazilian Ministry of Energy hopes to stimulate this growth trend through a program called Potencializa Exploration and Production, a program whose main principle is to encourage investment in frontier, commercial marginal and mature oil basins. In addition, Brazil is working to expand spending and activity in onshore drilling, with Reuters noting that small and medium-sized Brazilian energy companies plan to invest $7.7 billion in onshore drilling operations between now and 2029.
While Petrobras will be a key driver of such a massive increase in production, with the company pledging to invest $78 billion over five years, a significant investment and technology infusion from foreign energy giants will be needed to achieve this goal. The reason for this is simple: significant increases in hydrocarbon production must be supported by a steady increase in recoverable reserves and the deployment of enhanced crude oil recovery technologies. This includes plans by small energy companies to invest $7.7 billion in Brazil's onshore fields by 2029, which will expand oil reserves and production.
In January, French super-energy giant Total Energy approved a $1 billion final investment decision (FID) for the Lapa southwest offshore oil project in Brazil's Santos Basin. Total Energy is the operator of this project with a 45% stake, while its partners Shell and another company hold 30% and 25% respectively. The project includes the development of three wells connected to the Lapa field floating production, storage and offloading (FPSO) facility, which has been operating in the northwestern part of the Lapa field since 2016. When it comes online in 2025, the FPSO facility is expected to pump 25,000 barrels of oil per day, increasing total field production to 60,000 barrels per day.
Total Energy said that this project fits well with the company's existing Brazilian assets and will provide a key growth lever for the company's sub-salt oil production. David Mendelson, Senior Vice President of Exploration and Production at Total Energy, said, "This latest development is an important milestone for Total Energy in Brazil and will increase production from its operations in the Santos subsalt basin, a key growth area for the company." He continued, "With its efficient engineering approach and synergies with existing facilities, this project exemplifies Total Energy's strategy of focusing on low-cost, low-emission assets."
At the end of May this year, Total Energy and its partners Petrobras, Qatar Energy and Petronas signed a production sharing contract for the Agua Marinha offshore block, located in the highly productive Campos Basin in the southern part of the Marlim Sul sub-salt field, for which the development contract was awarded to Total Energy in December last year. The block is believed to have the potential to replicate the success of PA Oil's 2017 Marlim Sul subsalt oil discovery. Total Energy's senior vice president of exploration said, "The signing of the production sharing contract for the Agua Marinha block expands our presence in this promising area of the Campos Basin subsalt with our three strategic partners, and we look forward to exploring the block and drilling the Touro prospective formation."
Earlier this year in May, Norwegian energy giant Equinor announced that it, along with partners Petronas and others, approved the FID to continue development of the $9 billion B-M-C-33 project offshore Brazil. The operation includes three subsalt gas and condensate discoveries with recoverable reserves of 1 billion barrels of oil equivalent. Upon start-up in 2028, the project is expected to recover 565 million cubic feet of natural gas per day, of which an estimated 88 percent will be exported. The operator, Equinor, holds a 35% interest in the extraction, with the remaining 30% held by Petronas.
Data released by ANP, Brazil's hydrocarbon regulator, show that in April of this year, Brazil produced an average of 3.1 million barrels of oil per day. This figure is almost 1% more than the previous month and 5% more than the same month last year. Brazil's total hydrocarbon production in April this year was just over 4 million barrels of oil equivalent per day, up 1.1 percent from March and 4.4 percent from the same month last year. These figures represent a modest recovery after the plunge in March of this year. This increase indicates Brazil's potential to become the world's largest oil producer, especially as it is expected to increase its oil production by 300,000 barrels per day by the end of this year, reaching 3.4 million barrels per day by the end of the year.
Last year, Brazil ranked ninth in the world in terms of oil production, surpassing Kuwait with an average oil production of just over 3 million barrels per day. Assuming that Latin America's largest economy will become the world's fourth-largest oil producer, in which case Brazil would need to extract more than 4.5 million barrels of oil per day to surpass Canada, which currently holds first place. The Brazilian Ministry of Energy expects Brazil's oil production to reach 5.4 million barrels per day by 2029, 80 percent higher than last year's 3 million barrels per day. The continued year-over-year increase in Brazilian hydrocarbon production suggests that Brazil has real potential to expand its oil production and become the fourth largest oil producer in the world.
Another key factor supporting these plans is Brazil's abundant hydrocarbon reserves. According to data released by ANP, the largest oil producer in Latin America had proven oil reserves totaling 14.9 billion barrels as of the end of last year, 77 percent of which were subsalt reserves. There were also 21.9 billion barrels of proved and probable reserves and 27 billion barrels of proved, probable and possible reserves. This indicates that Brazil has considerable hydrocarbon potential and the reserves needed to support a significant increase in oil production. These reserves will continue to grow as exploration and development drilling activity increases, and the international rig count in service released by Baker Hughes shows an increase of 17 rigs in service in Brazil by the end of May this year, compared to 11 rigs in the same period last year.
The huge leap in oil production will be driven by the expansion of sub-salt oil production, which the Brazilian Ministry of Energy believes will eventually account for 80 percent of Brazil's total hydrocarbon production, compared to the current figure of about 77 percent. Achieving this goal will require a significant increase in production, which can only be achieved if energy investment and drilling activity expand significantly. The Brazilian Ministry of Energy hopes to stimulate this growth trend through a program called Potencializa Exploration and Production, a program whose main principle is to encourage investment in frontier, commercial marginal and mature oil basins. In addition, Brazil is working to expand spending and activity in onshore drilling, with Reuters noting that small and medium-sized Brazilian energy companies plan to invest $7.7 billion in onshore drilling operations between now and 2029.
While Petrobras will be a key driver of such a massive increase in production, with the company pledging to invest $78 billion over five years, a significant investment and technology infusion from foreign energy giants will be needed to achieve this goal. The reason for this is simple: significant increases in hydrocarbon production must be supported by a steady increase in recoverable reserves and the deployment of enhanced crude oil recovery technologies. This includes plans by small energy companies to invest $7.7 billion in Brazil's onshore fields by 2029, which will expand oil reserves and production.
In January, French super-energy giant Total Energy approved a $1 billion final investment decision (FID) for the Lapa southwest offshore oil project in Brazil's Santos Basin. Total Energy is the operator of this project with a 45% stake, while its partners Shell and another company hold 30% and 25% respectively. The project includes the development of three wells connected to the Lapa field floating production, storage and offloading (FPSO) facility, which has been operating in the northwestern part of the Lapa field since 2016. When it comes online in 2025, the FPSO facility is expected to pump 25,000 barrels of oil per day, increasing total field production to 60,000 barrels per day.
Total Energy said that this project fits well with the company's existing Brazilian assets and will provide a key growth lever for the company's sub-salt oil production. David Mendelson, Senior Vice President of Exploration and Production at Total Energy, said, "This latest development is an important milestone for Total Energy in Brazil and will increase production from its operations in the Santos subsalt basin, a key growth area for the company." He continued, "With its efficient engineering approach and synergies with existing facilities, this project exemplifies Total Energy's strategy of focusing on low-cost, low-emission assets."
At the end of May this year, Total Energy and its partners Petrobras, Qatar Energy and Petronas signed a production sharing contract for the Agua Marinha offshore block, located in the highly productive Campos Basin in the southern part of the Marlim Sul sub-salt field, for which the development contract was awarded to Total Energy in December last year. The block is believed to have the potential to replicate the success of PA Oil's 2017 Marlim Sul subsalt oil discovery. Total Energy's senior vice president of exploration said, "The signing of the production sharing contract for the Agua Marinha block expands our presence in this promising area of the Campos Basin subsalt with our three strategic partners, and we look forward to exploring the block and drilling the Touro prospective formation."
Earlier this year in May, Norwegian energy giant Equinor announced that it, along with partners Petronas and others, approved the FID to continue development of the $9 billion B-M-C-33 project offshore Brazil. The operation includes three subsalt gas and condensate discoveries with recoverable reserves of 1 billion barrels of oil equivalent. Upon start-up in 2028, the project is expected to recover 565 million cubic feet of natural gas per day, of which an estimated 88 percent will be exported. The operator, Equinor, holds a 35% interest in the extraction, with the remaining 30% held by Petronas.
These events indicate that offshore investment in Brazil remains strong. As mentioned earlier, foreign energy giants continue to approve multi-billion dollar projects in Brazil, which will significantly increase production. Even Petrobras' decarbonization plans will have little impact on the increase in Brazil's oil production and exports, which Petrobras expects to increase by 19 percent by 2027. For these reasons, the ambitious goal set by Brazil's energy ministry of extracting 5.4 million barrels of oil per day by 2029 appears achievable.
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