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Montevideo, May 26th 2019 - 11:38 UTC

Lula Says Brazil Oil Find May Lead to OPEC Membership

Sunday, November 11th 2007 - 20:00 UTC
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Pte. Lula da Silva wish to Brazil join OPEC Pte. Lula da Silva wish to Brazil join OPEC

Brazilian President Luiz Inacio Lula de Silva said the discovery of reserves that may total as much as 8 billion barrels of oil and natural gas may lead the country to join the Organization of Petroleum Exporting Countries

Brazil won't join for at least five years, the amount of time its state-controlled oil company, Petroleo Brasileiro SA, needs to start output from the Tupi field, Lula said today in Santiago before leaving an Ibero-American summit. Brazil would join Venezuela, a founder, and Ecuador, which is rejoining this month, as the cartel's third South American member. The field, where the U.K.'s BG Group Plc and Portugal's Galp Energia SGPS SA are partners, may boost Brazil's reserves by almost two-thirds, transforming it from a small net exporter into a major supplier to world markets. Still, it's premature for Lula to announce his intentions to enter OPEC since ''there are huge technical challenges,'' said David Fleischer, a political science professor at the University of Brasilia. Lula ''may be getting ahead of himself because even though the markets loved the Tupi announcement, there's no guarantee they'll be able to make the field work,'' Fleischer said. ''It sounds like Lula got a bit over-stimulated by his time with'' Venezuelan President Hugo Chavez, he said. 'Road to Social Cohesion'Chavez, who has sought to use his country's oil wealth to counter U.S. influence in the region, urged Lula during the summit to sell oil at below-market prices to poor countries. For Chavez, Brazil's entry into OPEC could help unite the region. ''The road to social cohesion'' could ''be made with gravel or with this oil that Lula has just found,'' Chavez told the summit in Chile. Lula said his goal in entering OPEC would be to ''reduce oil prices a little, because that is one of the contributions that the countries rich in oil can give.'' OPEC member states produce about 40 percent of the world's crude oil and attempt to direct prices by adjusting supply. The discovery may allow Brazil to rival Venezuela in setting energy policy in the region and give it more leverage over Bolivia, the source of half of its natural gas, Fleischer said. ''The timing of the Tupi announcement on Nov. 8 was designed to boost Lula's bargaining power with Bolivia, Venezuela and Argentina,'' Fleischer said. ''It's no surprise that Lula flew directly from Petrobras headquarters the day of the announcement to Santiago.'' Norway's ReservesTupi is the second-biggest field found in the last 20 years and holds almost as much as the 8.5 billion barrels of reserves of Norway, according to BP Plc. The field contains both oil and natural gas. By the middle of the next decade Brazil may be producing as much as 1 million barrels of oil a day from the field, Petrobras Chief Financial Officer Almir Barbassa said in an interview yesterday. Petrobras must still do more work to confirm the size of the field, Barbassa said. Petrobras will likely have to increase its $112.4 billion 2008-2012 investment plan to develop the field, which lies beneath more than 2 kilometers of water and is 5 kilometers or more below the ocean floor. Petrobras shares surged 14 percent on Nov. 8 after the announcement. The stock rose 1.45 reais, or 1.8 percent, to 81.65 reais yesterday on the Sao Paulo stock exchange. By Steven Bodzin and Jeb Blount - Bloomberg

Categories: Energy & Oil, Brazil.

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