Sharply weaker oil prices, the coronavirus pandemic and heightened geopolitical uncertainty have done little to blunt Brazil’s epic offshore oil boom, while Nigeria’s oil production has remained stagnant due to a myriad of excuses.
The waters of Nigeria’s offshore domain is one of the most fertile hydrocarbon provinces in the world while current oil reserve in the country is estimated at 36 billion barrels, however Brazil’s oil reserves of 12.84 billion barrels is gripping oil industry with rapid oil output and exports while the country’s executives are exploring new market.
Brazil is fast shaping up to become the world’s premier offshore oil boom. A combination of vast oil potential, extremely low sulphur light and medium crude oil blends, and growing demand from refiners for sweet lighter crude oil coupled with low break-even costs makes it a highly appealing jurisdiction for investment from global energy majors.
The scale of Brazil’s deep-water offshore oil boom is underscored by the pre-salt Tupi oilfield, which for the third quarter of 2020 reached the impressive milestone of having pumped two billion barrels of accumulated oil production in the decade since commercial oil production began.
A key reason for this is the rapidly growing popularity of the sweet medium crude oil grades produced from Brazil’s pre-salt oil fields, notably Tupi, the world’s largest deep-water oilfield, and the Buzios field.
Petrobras, which is spearheading the development of Brazil’s vast offshore pre-salt oil fields, reported record crude oil exports for September 2020 of which around 87percent were bound for China.
By September 2020, Brazil had soared to be the third-largest supplier of crude oil to China, the world’s second-largest economy.
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“Brazilian oil production has been ramping up since the beginning of the pandemic,” Fernanda Delgado, senior researcher at Brazilian think-tank FGV Energia told Petroleumeconomist.com
Brazil’s growing oil grades holds a potential danger for Nigeria’s crude oil export market most of whom are also classified under the light sweet due to low level of sulphur content and also because they are predominantly light oil grade.
“We expect internal demand to recover only by the end of 2021, but there will be more demand for exports over the coming months,” Delgado said.
“We expect this to have a positive evolution in the near future, in three years approximately to have a consolidated position in the (Indian) market,” CEO of Petrobras, Roberto Castello Branco, told Reuters earlier this week.
Should the above development affect India’s demand for oil, it could have a significant impact on Nigeria’s revenue situation and could further trigger another round of devaluation for the country.
Nigeria relies on India for about 13 percent of its exports, the highest when compared to any other country.
Brazil’s national oil company plans to have 12 FPSOs installed in the Buzios field by 2030, which is anticipated will be pumping more than 2 billion barrels of crude daily, making it Brazil’s largest oilfield.
Nigeria’s deep-water assets account for 40.47 percent of the total production of 2.1 million barrels per day (bpd), however, boosting offshore developments depends on efforts to make the regulatory and legislative backdrop more certain for investors.
“Nigeria’s deep-water projects are already delayed because of a lot of fiscal uncertainty, and this increase in government share from deep-water production makes it harder for IOCs to sanction new projects,” warned Gail Anderson, research director at consultancy Wood Mackenzie.
Offshore assets such as Chevron Agbami field, ExxonMobil Erha field, Nigerian Agip Exploration Aboh field, Total Exploration and Production Akpo and Usan fields, and to the most recent, Egina field have all started exploration, drilling and producing in full swing, yet at least 80 other deep-water oil blocs are yet to begin operations.
Nigerian crude reserves, which stood at 38 billion barrels in 2015 have steadily declined over the past five years due to a combination of factors including a lack of funds, security challenges in the main oil-producing Niger Delta region and uncertainty over the government’s oil sector reform that has stifled investment in new exploration programs.
Nigeria is desperate to increase its oil reserves as a fall in investment in the last year has put some strain on the country’s oil and gas sector.
The country’s oil ministry is banking on a pick-up in exploration activity from the small, marginal fields soon to be handed out to investors and the planned reform of the oil sector that would stimulate investment.
