Saturday, April 26, 2008

Brazil's Sugar Loaf Oil Field and American Oil Dependence

Petroleo Brasileiro SA, Brazil's behemoth oil driller and producer has seen its stock rage from $25 / share in September 2007 to $84.59 on Friday April 26, 2008. Similarly Brazil's Exchange Traded Fund iShares MSCI Brazil Index Fund has more than doubled in the same time period. There is huge market demand for Brazil's equity. Why? Brazil may provide a much more significant percentage of America's oil needs in the future. Those are very big needs. The Carioca/Sugar Loaf field is a potential deepwater oil field in the Atlantic Ocean off the coast of São Paulo, Brazil. The field is part of an important emerging petroleum basin known as the Santos Subsalt Basin. Two other large oil fields have been discovered in this basin in 2007 and 2008, the Tupi and Jupiter fields. By now the state and size of the Carioca/Sugar Loaf field has not been clarified, but estimates are between 25 and 40 billion barrels.

According to Bloomberg:

*Among discoveries in the past 30 years, only the 15-billion-barrel Kashagan field in Kazakhstan is larger than the Tupi's field estimated 8 billion barrels.
*Haroldo Lima, director of the country's oil agency, last week said another subsea field, Carioca, may have 33 billion barrels of oil. That would be the third biggest field in history, behind only the Ghawar field in Saudi Arabia and Burgan in Kuwait.
*The U.S. imports about 10 million barrels of oil a day, or 66 percent of its needs, according to the Energy Department in Washington. Saudi Arabia was the second-largest supplier in January, behind Canada.
*Persian Gulf nations accounted for 23 percent of U.S. imports, compared with Brazil's 1.7 percent share. Brazilian crude output rose 1.9 percent last year to 2.14 million barrels, according to the International Energy Agency.

With Oil trading at $116 US Dollars per Barrel...this means that Brazil may have recently added 2.9 to 4.6 Trillion Dollars to their national wealth. It is kind of like finding 15 to 25% of the U.S.'s total value of outstanding equities ($20 Trillion) off the coast of Sao Paulo.

According to Peter Zeihan, vice president of analysis at Strategic Forecasting in Austin, Texas.``The finds they've got so far are just the tip of the iceberg,'' Zeihan said. ``Brazil is going to change the balance of the global oil markets, and Petrobras will become a geopolitical supermajor.''

No comments: