Brazil is poised to sharply increase oil exports this year as heavy investments spur new output and demand for its lighter crudes win more buyers, especially in China and India. Production is projected to rise 210,000 barrels per day (bpd) in 2017, second only in the size of additional supply to the United States among non-OPEC producers.
Higher output from the U.S. and Brazil are among the factors impeding an OPEC-led effort to lift crude prices through production cuts. Growth in exports should continue in future years as companies such as Royal Dutch Shell Plc prepare to tap some of the largest discoveries made since the end of the last decade off the Brazil’s Atlantic coast.
Already just in the first two months of the year, Brazil’s oil exports have soared 65% over the same period a year earlier to record highs of more than 1.46 million bpd, according to government data. Consultancy Wood Mackenzie estimates 2017 exports will hit nearly 1 million bpd, up from 798,000 bpd last year.
Years of heavy investment that left state-controlled Petrobras as the world’s most indebted oil company are beginning to pay off. Brazil hopes to use higher oil sales to help drag its economy out of a two-year recession. Exports are rising along with the company’s output of light, sweet crudes, Guilherme Franca, executive manager for marketing and trading at Petrobras said.
“Our production consists of much lighter oil than we used to produce in the past,” he said in an interview. “We have demand for more of it than we can deliver.”
Light, low-sulfur crudes are easier and cheaper to refine into gasoline and diesel, and match demands for less polluting fuels in Asia, the United States and Europe.
Franca said exports by Petrobras alone rose to 420,000 bpd in 2016 and should reach 450,000 bpd this year. If it meets future targets, the company could be exporting as much as 750,000 bpd as soon as 2020, he said.
In the first two months this year, Brazil sold 10.4 million barrels of crude to India, half as much as it shipped to the country during 2016, Brazil’s trade ministry data showed.
Sales to China in January and February totaled 40.8 million barrels, up 125% from the same period in 2016 and more than 10 times Brazil’s shipments to the country five years ago. Some of the oil shipments are linked to repayments on as much as US$15 billion in loans from China, including debt taken on in 2009.
Under deals with lender China Development Bank, the oil giant would send as much as 300,000 bpd to four Chinese firms: China National United Oil Corporation, China Zhenhua Oil Co Ltd, Chemchina Petrochemical Co Ltd and Unipec Asia, a subsidiary of Sinopec Corp.
Petrobras produced 2.14 million bpd in 2016 and targets 2.77 million bpd by 2021. The company, which is trying to reduce debt of around US$100 billion, is pouring all its efforts into the high-yield subsalt region.
Shell, the second largest producer in Brazil after Petrobras, is pumping around 295,000 bpd and wants to quadruple that in three years. The company is part of a consortium that will explore the giant Libra subsalt prospect, along with Petrobras, France’s Total SA and China’s CNOOC Ltd and China National Petroleum Corp.