The Effect of Brazil Offshore Crude Oil on Commodities Markets
One of the most noteworthy events in the commodities sector over the last several years, gripping the petroleum industry, has been the prolific discoveries of oil in offshore Brazil.
Since 2007, the steady stream of important discoveries coming out of Brazil has seemed endless. First, the Tupi oil field that was discovered off the southeastern coast, not far from Rio de Janeiro, added between 6 billion and 8 billion barrels to the country’s petroleum reserves. Most of this oil is located in what is known as pre-salt regions, which are more difficult to access but still fully recoverable.
A few months after Brazil’s state-owned oil company, Petrobras, discovered the Tupi oil field, privately held oil company OGX announced another large discovery in more shallow waters of the Campos Basin. OGX’s discovery of approximately 3.7 billion barrels helped catapult its main shareholder, Eike Batista, into the ranks of the world’s billionaires.
These discoveries and other activities in the Brazilian commodities space make Batista now the seventh-richest person in the world, according to Forbes magazine.
Not long after these two major discoveries, Petrobras announced an even larger discovery: the Libra field, which may hold at least 10 billion to 15 billion barrels of recoverable oil in an offshore field. These major discoveries mean that Brazil has the fastest-growing reserves in the world, faster than Angola, Venezuela, and Australia.
According to BP, Brazil’s reserves have the capacity to grow at least 700 percent due to the oil in its pre-salt offshore region. It’s therefore critical to keep an eye on Brazil and other discoveries that may shift the global petroleum calculus.
Having large deposits of crude doesn’t mean that a country has exploited and developed all its oil fields. For example, although Iraq has the third-largest oil deposits in the world, it’s not even among the top ten producing countries, because of poor and underdeveloped infrastructure. There’s a big difference between proven reserves and actual production.
The calculation of proven, recoverable deposits of crude oil isn’t an exact science. For example, Oil & Gas Journal figures are different from those of the Energy Information Administration (EIA), whose figures, in turn, are different from those of the International Energy Agency (IEA).
You should take a big-picture approach to global reserve estimates and consulting all the major sources for these statistics. To keep up on updated figures and statistics on the oil industry, check out the following organizations: