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Brazilian oil production increased last month and is now
estimated to be approaching 2.8 million b/d. Growth has reached 8%
year-on-year. The Lula field, in the pre-salt Santos Basin, has
been the largest producer. More than 95% of the country's total oil
production now comes from offshore fields, with Petrobras operating
more than 92.5% of the overall output.
In terms of Brazilian crude oil importers, China has been
dominating the market, after absorbing 56% of barrels shipped in
2019, its market share has increased significantly since last year,
when it stood close to 48%. China's appetite for Brazilian grades
is expected to last, which increases the interest for foreign
majors to invest in the country's new projects. Petrobras has also
been investing in storage facilities in South East Asia, to secure
more stable services to China.
The country's crude oil production faced pressure earlier this
year, which was primarily driven by maintenance of the FPSO Cidade
de Mangaratiba platform, operating in the Campo de Lula. However,
exports of crude oil have been quite strong this year, having
expanded by around 15% year-on-year between January and August
2019, as data by IHS Markit Commodities at Sea
suggests.
There is still optimism, with the National Petroleum Agency
(NPA) expecting oil production volume from Brazil to "reach one of
the highest in the world" during the next couple of years. Two more
auctions will be held this year, scheduled for October and November
which will include pre-salt areas. Revenues could reach BRL 11
billion (USD 2.9 bn).
The collapse of Venezuelan crude oil production and exports
created opportunities for Brazil, with demand for the Latin
American country's heavy grades rising fast. Higher interest for
its Lula/Buzios grades allowed exports to China to boom since the
second quarter of the year. The second half of 2019 looks very
promising for the country, as new offshore production comes
onstream.
It's also very interesting to note that the US has been relying
more on Brazil for its crude imports. Volumes shipped to the US
from Brazil have increased rapidly since 2018, with year-on-year
growth standing close to 19% for the period between January and
August. This still represented only 5% of US imports between May
and August 2019, but with impressive growth to report from 2.2% in
2018. Especially as this happened while US imports have been
quickly declining from 4.5 million b/d in 2018 to levels marginally
above 3.5 million b/d in 2019 so far. With Saudi Arabia and other
OPEC members having extended production cuts, the US will heavily
rely on exporters across the Americas, to replace volumes
previously imported from Venezuela. The future looks very promising
for Brazil.
The region has become much more important for the shipping
industry as well, with more VLCC owners targeting the market by
repositioning ballasters to Brazil, as interest in Asian crude
importers in Latin American grades, such as Brazil's Buzios and
Lula remains high. This will last as long as flows from Iran remain
close to zero.
Posted 09 September 2019 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime, Trade & Supply Chain, S&P Global Market Intelligence
