There is an old cliché about Brazil that sums up the country’s unmet potential. “Brazil is the country of the future…and always will be.” That expression aptly describes the country’s oil sector as well.
The oil and gas reserves in Brazil are immense. The 2007 discovery of vast reserves of oil located beneath a layer of salt in the Atlantic Ocean was supposed to turn Brazil into an energy superpower. Once the state-owned firm Petrobras tapped the “presalt,” Brazil would more than double its oil production by 2020, targeting 5 million barrels per day. At those levels, it would be in an elite club of oil producers, likely breaking into the top five worldwide.
But in dramatic fashion, late last month Petrobras finally faced reality and overhauled its plans and projections moving forward, gutting capex by 37 percent and slashing its expected 2020 production level down to just 2.8 million barrels per day. In other words, Petrobras expects to merely keep production flat through the end of the decade.
Due to its astronomic levels of debt, Petrobras has decided to sell off some of its assets. And to ease the burden, the Brazilian Congress is looking to overhaul its laws to open up the oil and gas sector to private investment, not so dissimilar to what is going on in Mexico.
Offshore Opens Up
That provides huge opportunities that were hitherto off limits to international companies. Of course, private companies…