Thursday, April 24, 2008

New source of oil to go online soon

April 24 (Bloomberg) -- Brazil's discoveries of what may be two of the world's three biggest oil finds in the past 30 years could help end the Western Hemisphere's reliance on Middle East crude, Strategic Forecasting Inc. said.

Saudi Arabia's influence as the biggest oil exporter would wane if the fields are as big as advertised, and China and India would become dominant buyers of Persian Gulf oil, said Peter Zeihan, vice president of analysis at Strategic Forecasting in Austin, Texas. Zeihan's firm, which consults for companies and governments around the world, was described in a 2001 Barron's article as ``the shadow CIA.''

Brazil may be pumping ``several million'' barrels of crude daily by 2020, vaulting the nation into the ranks of the world's seven biggest producers, Zeihan said in a telephone interview. The U.S. Navy's presence in the Persian Gulf and adjacent waters would be reduced, leaving the region exposed to more conflict, he said.

[. . .]

Brazil's state-controlled Petroleo Brasileiro SA in November said the offshore Tupi field may hold 8 billion barrels of recoverable crude. Among discoveries in the past 30 years, only the 15-billion-barrel Kashagan field in Kazakhstan is larger.

Haroldo Lima, director of the country's oil agency, last week said another subsea field, Carioca, may have 33 billion barrels of oil. That would be the third biggest field in history, behind only the Ghawar field in Saudi Arabia and Burgan in Kuwait.

Analysts Mark Flannery of Credit Suisse Group and Gustavo Gattass of UBS AG challenge the estimate for Carioca. Lima, the Brazilian oil agency director, later attributed the figure to a magazine.

Flannery told clients during an April 16 conference call that 600 million barrels is a ``reasonable'' estimate and suggested Lima may have been referring to the entire geologic formation to which Carioca belongs.

Carioca is one of seven fields identified so far in the BM- S-9 exploration area, part of a formation called Sugar Loaf.

If additional drilling by Petrobras, as Petroleo Brasileiro is known, confirms the Tupi and Carioca estimates, the fields together would contain enough oil to supply every refinery on the U.S. Gulf Coast for 15 years. Petrobras said it needs at least three months to determine how much crude Carioca may hold.

When I first heard about this find around a week ago my first thought was "thank God this is off the shore of Brazil and not the United States". Because the Brazilians will actually go out and drill the stuff and sell it rather than letting econazis declare it off limits.

The Brazilian oil fields do not have to "replace" oil from the Middle East to be hugely important. Just the fact that the world's supply of crude is going to be increased significantly will exert downward pressure on the world price. Remember in the law of supply and demand when demand outraces supply prices rise but when supply manages to get ahead of demand prices fall.

If the US would tell the environmental wackos to shove a sock in it then start developing our own resources we could, along with the new discovery in Brazil, take the price of oil back to $70.00 per barrel.