New Opec overture may reopen rift in Brasilia

: Crude oil
20/01/22

Brazil's fresh overture to Opec threatens to revive government discord over a proposed membership commitment that could restrict the non-Opec country's future pre-salt production growth.

The government plans to discuss Opec membership at a meeting in Saudi Arabia later this year, mines and energy minister Bento Albuquerque said during a trip to India this week.

The internal rift first came to light last year when Brazilian president Jair Bolsonaro raised the possibility of Opec membership during an October 2019 trip to Riyadh.

At the time, Bolsonaro's comments confounded investors and pro-market economy minister Paulo Guedes, who later said the country "would never favor using cartels or strengthening cartels to corner democracies that live on oil."

Bolsonaro's remarks had also sparked a negative reaction from Petrobras chief executive Roberto Castello Branco.

The company did not respond to a request for comment on the renewed prospect of membership.

A mines and energy ministry spokesperson declined to comment on Albuquerque's remarks. The minister is part of a government delegation that is currently at the World Economic Forum in Davos.

Government officials, including Albuquerque, had downplayed the impact of Bolsonaro's comments on two disappointing pre-salt licensing rounds in November 2019. Brazil is planning to launch three more rounds this year.

Brazil had been invited to send a representative to a December 2019 Opec meeting, as it has done occasionally in the past, but the government claimed Albuquerque had another important appointment on the same date.

Albuquerque seems most aligned with Bolsonaro's willingness to consider an Opec invitation which the government said was extended by an unnamed Middle East country last year. The minister, a former Navy admiral, says discussions about cooperation between Brazil and Opec with Saudi officials could take place as early as July.

Brazil is a fast-growing non-Opec oil producer. Output is officially forecast to climb to around 3.5mn b/d in 2020 from 3.1mn b/d in 2019, and jump to 7mn b/d by around 2030.

Crude exports, now around 1mn b/d, are expected to grow along with increased domestic production, with most output flowing to China.

In the past, Brazil's mines and energy ministry has sat in on Opec and non-Opec meetings. But it has said that under Brazilian law and contracts, the federal government — the controlling shareholder of Petrobras — cannot interfere with the production of contracted companies.

Petrobras accounts for about three-quarters of Brazil's production. Among leading foreign producers are Shell, Spanish-Chinese venture Repsol-Sinopec and Norway's Equinor.

By Nathan Walters

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