Bento Albuquerque, minister for Mines and Energy of Brazil, announced on No. 7 that Brazil’s oil production would more than double to at least 7 million barrels per day (bpd). ANP, Brazil’s oil regulator, reports that oil production reached a record high of about 3 million bpd last August, a substantial 18.5 percent increase, compared with the same time last year. This surge in production owes much to the fruition of past investments. However, future expansion will depend on access to huge amounts of capital and high-end technology from foreign investors, and big oil companies with experience of deep water and pre-salt plays. All things considered, Brazil could be on track to double crude output.
Brazil joining OPEC
Total crude supply from outside OPEC + is set to reach 67.1 million bpd in 2020, driven largely by U.S. tight oil and just when the IEA fears that world demand for crude will fall further. Brazil is currently the second largest non-OPEC and allies producer of crude after North America. Therefore, Saudi Arabia’s informal invitation to President Bolsonaro for Brazil to become an OPEC member is unsurprising, given that it would wish to maintain a cap on production at a time of slowing crude demand. What would be surprising however is for Brazil to join OPEC, given the stated policy of the government to better integrate its energy industry with the global market and significantly boost domestic production. These energy policy ambitions by Brazil run contrary to the current OPEC command and control culture and ongoing efforts to restrict crude output.
According to Anabal Santos Jr., executive secretary of the Brazilian Association for Independent Producers of Oil & Gas (ABPIP), tough environmental licenses, strict decommissioning rules and local content requirements could act as disincentives to foreign investors.