Major Discoveries and $113 Billion Investment Moving Petrobras into No. 3 Global Fuel Sales Spot

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Researched by Industrial Info Resources (Sugar Land, Texas)--At a time when there is a negative conjunction between the price of oil, production levels, refining undercapacity and inflationary threats caused by the rising price of gasoline at the pumps, Brazilian oil major Petrobras (NYSE:PBR) (Rio de Janeiro) is taking the opportunity to step into the breach with plans for a massive $113 billion expansion investment ranging from the development of new upstream oil fields to increase refining capacity to lower prices at the pumps.

Plans now being put into place see the company ranking third in the world in sales of gasoline and diesel fuel. To support these plans, it aims to hire 14,000 additional engineers, geologists and drillers over the next three years, and it has set in motion the process of issuing letters of intent to purchase up to 17 new offshore drilling rigs.

The confidence to make these moves comes from the discovery of three new major oil fields since November 2007 with the discovery of the Tupi oil field in the Santos Basin. This field, with an estimated resource of 5 billion to 8 billion barrels, made it the largest new oil find since the Kashagan field in Kazakhstan in 2000. In the third week of January 2008, the Jupiter field discovery was announced. This could be in the same resource league as Tupi, 37 kilometers away, and 5,500 meters below the Atlantic Ocean, 270 kilometers from Rio de Janeiro. Then in mid-April the discovery of the mega-Carioca field in the Santos Basin was announced with an estimated 33 billion barrels of oil and oil equivalent (petroleum and petroleum gases). If proven, these reserves would make Carioca the third largest field in the world with the capacity to produce into the next century. For related news, see April 29, 2008, article - Petrobras Discovers Another Large Oil Field in Southern Brazil.

Brazil's President Lula da Silva has been reported by Germany's "Der Spiegel" magazine as saying that the country intends to exploit the major deep water oil finds near Rio de Janeiro. He said that Brazil will become a major oil exporter and he added that they wanted to join OPEC and would try and make oil cheaper. The new discoveries could put Brazil in a position where its reserves were second in size to Saudi Arabia's in global terms.

Petrobras is planning to output to 4.2 million barrels per day (BBL/d) of oil by 2015, an increase of 79% over current levels, and will refine 3.5 million BBL/d of the total. Currently the company processes about 2 million BBL/d and has interests in 18 refineries. A decision is due from the board on the purchase of a 275,000 BBL/d refinery at Aruba from Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas). This plant has two delayed coking units that can handle heavy crude of the type expected to come from the new fields.

It could be with some relief that international oil companies and developers learn that Petrobras intends to attract all its new employees from Brazilian universities and technical schools with the incentive of training and careers for a lifetime. By increasing the work force by 23% to 74,000 to cope with expansions, Petrobras will move into the league of ExxonMobil (NYSE:XOM) (Irving, Texas) and Shell (NYSE:RDS.A) (The Hague, The Netherlands) currently processing 5.6 million BBL/d and 3.8 million BBL/d, respectively.

The UBS bank estimates that Tupi and Carioca would need about $600 billion to develop, more than enough to hold the interest of global oil field companies for some time to come as well as maintaining the price escalation pressures on oil field and refinery project resources.

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