Brazil’s oil: Might the South American country join OPEC?

Brazil’s current output would make it OPEC’s third-largest producer.

Brazilian President Jair Bolsonaro speaks during the Future Investment Initiative conference in Riyadh, Saudi Arabia, October 30, 2019
On Wednesday, Brazilian President Jair Bolsonaro said he wants his country to join OPEC but cautioned he would have to consult his economy and energy ministers to ensure they could follow through if a decision was made [File: Hamad I Mohammed/Reuters]

Brazilian President Jair Bolsonaro on Wednesday said he wants his country to join the Organization of the Petroleum Exporting Countries (OPEC), a move that would add the most significant new producer to the oil cartel in years.

The comments come ahead of a massive auction of oil rights in Brazil, which is boosting output rapidly. OPEC membership would likely require Brazil to limit oil production, potentially throwing future expansion plans into doubt.

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OPEC includes top exporter Saudi Arabia and 13 other countries. Since 2017, OPEC has had a deal with several non-member producers, excluding Brazil, to limit supply to bolster prices.

“I personally would very much like Brazil to become a member of OPEC,” Bolsonaro said at an investment conference in Riyadh, speaking through a translator.

Brazil would be the most significant producer to join OPEC, founded in 1960, for years. The country’s current output – far above that of recent new members such as Congo and Equatorial Guinea – would make it OPEC’s third-largest producer.

The Brazilian president said he would have to consult his economy and energy ministers to ensure they could follow through if a decision was made.

He said Brazil had larger oil reserves than some OPEC members and that when the country was working in partnership with the top six producers in the world, that would help stabilise the global market.

OPEC delegates said membership talks with Brazil were going on although it had made no formal request to join the group.

Output rising

Oil output has been rising rapidly in Brazil from offshore fields and production, surging in August from 220,000 barrels per day (bpd) to a record of 3.1 million bpd, according to the International Energy Agency.

Those figures would make Brazil the third-largest OPEC producer after Saudi Arabia and Iraq – and they mean it is now generating the equivalent of more than 10 percent of current OPEC output.

Brazilian authorities have approved 14 companies to participate in the oil bidding round next month, in which total signing bonuses are expected to be the biggest so far, exceeding $25bn, according to the National Agency for Petroleum, Natural Gas and Biofuels, the country’s national oil regulator.

The so-called transfer-of-rights auction is scheduled for November 6, and concerns a zone of Brazil’s southeastern coast. Companies participating include global oil majors as well as state-run Petroleo Brasileiro SA, or Petrobras.

Brazil is a bigger producer than the several others that have left and joined OPEC in recent years.

Nigeria, which pumps almost two million bpd, is the biggest producer to join Vienna-based OPEC and remain a member since it became one in 1971.

Ecuador plans to exit the cartel in 2020. Qatar quit this year. Equatorial Guinea joined in 2017 and the Republic of the Congo became a member last year.

Source: Reuters