In a little over a decade Latin America’s largest economy Brazil has become a leading global oil producer. At the end of 2020, Brazil was not only pumping the most oil in Latin America, an average of 3.03 million barrels daily, but finished ranked as the world’s seventh largest producer behind OPEC member Iraq and ahead of the United Arab Emirates. According to Brazil’s Mines and Energy Minister Bento Albuquerque, Latin America’s top oil producer will become the world’s fifth-largest petroleum exporter by the end of this decade. Brazil’s government is forecasting that the country will be pumping 5.3 million barrels of oil per day by 2030 facilitating its ability to substantially boost exports. That is compared to an average of 3.05 million barrels of crude oil and condensate production per day for July 2021 and an average of 2.94 million for the first seven months of 2021. This indicates that there is still considerable work to be completed if Brazil is to achieve such an ambitious target.
Despite ructions, earlier this year sparked by President Bolsonaro’s dismissal of Petrobras CEO Roberto Castello Branco who was replaced by former Defense Minister Joaquim Silva e Luna, production continues to grow. Even the considerable fallout from the COVID-19 pandemic has done little to blunt Brazil’s monumental offshore oil boom. Data from Brazil’s National Agency of Petroleum, Natural Gas and Biofuels shows that by July 2021 the country was pumping on average 3.9 million barrels of oil equivalent per day, a 4% increase month over month and 0.6% higher than a year earlier. It is Brazil’s prolific offshore pre-salt oilfields that are driving the country’s production growth. During July 2021, pre-salt oil production jumped by 3.7% compared to a month prior and 4.1% year over year to 2.8 million barrels per day.
It is the giant Tupi oilfield, which since starting production in 2010 pumped more than 2 billion barrels of crude oil and is Brazil’s largest producing field pumping 916,826 barrels of petroleum per day during July 2021. That is followed by the 210,000-acre Buzios oilfield, which for the same period pumped 569,648 barrels of crude oil, making it Brazil’s second largest field. Buzios, the world’s largest deepwater offshore oilfield with the capacity to pump 600,000 barrels daily from 4 FPSOs and a network of 45 completed wells, is the engine for Brazil’s planned crude oil production growth. Brazil’s National oil company Petrobras plans to invest $17 billion in the deep-water field between 2021 and 2025 which will see 8 FPSOs added in less than a decade lifting production capacity to at least 2 million barrels per day. That means the supergiant offshore field will be producing up to an additional 1.4 million barrels daily by 2030 or around 61% of the planned additional production of 2.3 million barrels per day by the end of the decade.
Buzios crude oil has an API gravity of around 28 degrees and 0.32% sulfur content which are similar characteristics to Brazil’s Lula oil variety which is extremely popular in China. Like Lula, Buzios is low sulfur and metals content crude oil grade which with a pour point of around 9 degrees indicates that it is relatively low in paraffin. Those characteristics make it not only cheaper and easier to refine into higher quality low emission fuels than heavier sour varieties of crude oil, but also suitable for blending with lower quality grades to produce higher-quality feedstock for refining. It is for those reasons that Buzios became highly popular among Asian refiners during 2020 as demand for sweet higher quality light and medium grade crude oil skyrocketed after the introduction of IMO2020 last year. China is now a key market for Brazilian crude oil with the volume of imports from Latin America’s largest petroleum producer soaring during 2020, seeing it become the third-largest crude oil supplier to the world’s second-largest economy. The volume of petroleum China is importing from Brazil has, however, steadily fallen since the start of 2021 with Latin America’s largest oil producer seeing July petroleum cargoes to China plunged by 47% compared to a year earlier. That has caused Brazil to slide from being the third-largest source for China’s crude oil imports to fifth place behind Angola at fourth, Iraq in third, and Russia then Saudi Arabia ranked second and first respectively.
Nevertheless, it is an energy-hungry China that will remain the primary consumer of Brazilian crude oil. The world’s second-largest economy is expected to pull ahead of the U.S. during 2021 to become the largest refiner globally. That, coupled with a return economic growth as pandemic impacts ease, will drive higher consumption of fuels. Demand for high-quality low sulfur and metals content crude oil is growing at a solid clip, primarily because of ever-stricter emissions regulations and the fact that it is easier as well as cheaper to refine. That is further bolstered by Asia being a key global shipping hub with Singapore, the world’s number one ranked bunkering port by volume, and Hong Kong the fourth largest. China’s production of maritime fuels is rapidly expanding, causing demand for sweeter low contaminant IMO 2020 crude oil grades to soar. For those reasons, demand for sweet high-quality crude oil remains strong in Asia. In fact, according to energy industry analysts, China’s refiners are reputedly paying premiums on certain crude oil imports to secure November 2021 supplies now that pandemic restrictions are easing.
Those events will ensure that demand for Lula and Buzios crude oil varieties will keep expanding, particularly as China’s economic growth and refining activity ratchets upward. The strong demand outlook coupled with the prolific pre-salt oilfields’ low breakeven prices estimated to be on average below $35 per barrel, and high-quality crude oil grades is attracting solid investment inflows from foreign energy majors. Those along with Petrobras’ planned $17 billion investment in the Buzios field will support Brazil’s forecast production growth, allowing Latin America’s largest economy to become the world’s fifth-ranked oil exporter.