[jamest]

If the oil importing nations of the world were smart (they're not), they would offer to guarantee the financing against a share of future production.

It is very much in the long term interest of importing nations to see projects like this proceed smoothly.

[Spanktron9]

Jamest

I agree on both counts. When the effects of slowing production growth run into the steepening depletion curve, all the money in the world won't put gas in your tank.

[ReverseEngineer]

I think the idea here is to wait until Brasil goes Bankrupt, then pick up their oil fields for pennies on the dollar. Why invest to get only a piece of the action when you can wait and get the whole deal later at a cheaper price?

Reverse Engineer

[Spanktron9]

$this->bbcode_second_pass_quote('ReverseEngineer', 'I') think the idea here is to wait until Brasil goes Bankrupt, then pick up their oil fields for pennies on the dollar. Why invest to get only a piece of the action when you can wait and get the whole deal later at a cheaper price?

Reverse Engineer

[JohnDenver]

Petrobras CEO Says Tupi Oil ‘Viable’ at Current Price (Update2)

$this->bbcode_second_pass_quote('', 'D')ec. 22 (Bloomberg) -- Petroleo Brasileiro SA, Brazil’s state-controlled oil company, said the offshore pre-salt oil fields, including Tupi, the largest discovery in the Americas since 1976, remain viable even after crude prices plunged.

“The pre-salt is viable at $40 to $50 a barrel,” Chief Executive Officer Jose Sergio Gabrielli said today. “We are also in an environment where the costs of production are likely to fall, we don’t know when, but they are likely to fall.”

[dukey]

well the WTI spot price is 33 dollars per barrel currently
lol

[TheDude]

Petrobras has shown essentially flat production for 3 years, even after almost 1 mb/d production additions - 640 kb/d in 2007 alone. No future years show additions at that level; it's not out of the question that they're about to peak.

[JohnDenver]

$this->bbcode_second_pass_quote('TheDude', 'P')etrobras has shown essentially flat production for 3 years, even after almost 1 mb/d production additions - 640 kb/d in 2007 alone.

[efarmer]

I can't wait for these sources to come on line if only
just for the advertising value. My yota wagon will really
be a grizzled elder by then. I can see the sign on the
station now:

"We have Tupi and Ku-Maloob-Zap on tap for your hoopty car."

[TheDude]

$this->bbcode_second_pass_quote('JohnDenver', 'A')s you can see, that 180kbd was barely ramping up at the end of 2007, and would be better attributed to 2H 2008.

[copious.abundance]

The bulk of the supply additions from the big pre-salt fields in the Santos basin won't come online until the 2nd half of the 2010's. Heck, they haven't even made any production plans for Sugar Loaf/Carioca yet, and rumor has it that one is several times the size of Tupi. The Wiki megaprojects list, as TheDude shows above, only goes through 2015. Even Tupi won't be at peak production by then. The recent supply additions by Petrobras in Brazil have largely been from some smaller and medium-sized fields in the Espirito Santo and Campos basins.

[copious.abundance]

BTW here is Brazil's crude oil and liquids production through October.

[TheDude]

$this->bbcode_second_pass_quote('OilFinder2', 'T')he Wiki megaprojects list, as TheDude shows above, only goes through 2015.

[jamest]

[quote]

BRASILIA, Brazil (AP) — China wants to loan Brazil's state oil company $10 billion to help develop massive new oil fields in deep water off the coast of Rio de Janeiro, Brazil's top energy official said in comments published Monday.

Mines and Energy Minister Edison Lobao also told the Folha de S. Paulo newspaper that the United Arab Emirates has offered to finance field development, but he did not specify a price tag.

Lobao said Chinese officials contacted his ministry to propose a loan and Petrobras then negotiated directly with the Chinese. He gave no details on the status of talks, and any deal would have to be approved by his ministry.

Petrobras, in an e-mailed statement to The Associated Press, didn't confirm a China deal, but said the company has historically searched for "varied sources of financing" and that recent deals will be included in its new investment plan, expected in the coming weeks.

Lobao told the privately run Agencia Estado news agency other countries also wanted to participate: "It's not just China. It's a range of opportunities that Petrobras has."

Lobao said the ministry has talked with a Japanese consortium, Canadian banks and various foreign oil service companies who want to invest in or work on offshore finds. He offered no other details.

Brazil also is ready to tap its foreign reserves to offer a credit line for exploration by Petroleo Brasileiro SA if needed, he added. Lobao's ministry confirmed the comments, but a spokesman did so only on condition of anonymity in keeping with department policy.

Lobao spoke as many Brazilian companies are being cut off from international credit, which has tightened in the global financial crisis. The minister and other top government officials have repeatedly said the crisis will not effect the exploration of the offshore oil reserves, which could hold up to 80 billion barrels of oil.

Petrobras says it has discovered 50 billion to 80 billion barrels of reserves over the past year and is gearing up to spend hundreds of billions of dollars during the next 30 years to extract the light crude.

Lobao said investment would not be hurt as long as oil prices stay above $30 per barrel. But other officials have put the price from $35 to $60 a barrel for deep-water exploration to remain viable.

Light, sweet crude for January delivery was up $2.89 to $43.70 a barrel in electronic trading Monday on the New York Mercantile Exchange.

Petrobras' American depository shares were up 7.8 percent Monday in New York, or $1.40 to $19.34. [quote]


http://www.google.com/hostednews/ap/art ... wD94UPIHO0

[Spanktron9]

Matt Simmons has commented in several video interviews that the level of technical complexity to even reach these fields, let alone make them economically viable has never been attempted an the reservoirs are so deep that the are very near the mantle of the earth.

To further address RE's point. Letting Brazil go belly up puts the timeline of bringing those fields into production so far back, that the ensuing shortages could cripple the production effort.

[lawnchair]

$this->bbcode_second_pass_quote('Spanktron9', '
')That is sound in theory, but it is based on the belief that BRazil would de-nationalize its Oil industry. A move I don't see as likely, regardless of price pressure.

[Tyler_JC]

$this->bbcode_second_pass_quote('lawnchair', '')$this->bbcode_second_pass_quote('Spanktron9', '
')That is sound in theory, but it is based on the belief that BRazil would de-nationalize its Oil industry. A move I don't see as likely, regardless of price pressure.

[copious.abundance]

Not this again . . . *sigh* This is old news by now.

People need to read the articles at the top of this page here, and in particular pay attention to ROCKMAN's first post on that page.

Petrobras will be releasing its 5-year spending plan (probably) this month. Only then shall we shall see how and if the credit crunch actually affects them.

[AirlinePilot]

OF,

You need to spend a little part of your day over at TOD. Make sure you read all of the Daily "Drumbeat" articles.

Its becoming painfully evident that the global economic crisis is already having a fairly large impact on your cornucopian outlook. I know its hard for you to see past those big blinders your wearing but open up your horizon a bit.

[ROCKMAN]

A couple of points worth considering. Above all else, the BZ gov't isn't developing these fields in the first place. They are being developed by public companies with Petrobras (owned 50% or so by the BZ gov't) being just one. My client is one of the other operators developing Deep Water fields down there as well as are a number of other US and foreign companies. If Petrobras is having a cash flow problem it’s as likely to do as much with their high activity level as anything else. I haven’t seen the stat for a while but a couple of years ago Petrobras had more offshore drilling rigs (175) under contract the next 6 largest operators combined. They also have long term leases on 80% of all the rigs in the world that can drill in water depths greater then 7000’. As far as the BZ gov't goes it's all positive cash flow: they get the front end bonus payments as well as the royalty payments. They pay for nothing. If the BZ gov’t didn’t have a peso development would probably move along even faster (they would be motivated to give up a bigger piece of the pie). In fact, when prices peaked last summer the gov’t announced they weren’t going to offer any more leases to anyone (including Petrobras) in the red-hot Santos basin. The gov’t was going to contract the drilling/development and own it 100%. If they are getting short on capital they might now reconsider that plan.

But, to be sure, the drop in oil prices will definitely slow up progress. But not right now. If a company has truly proven reserves (what the independent bank auditors say...not the company talking heads) then the banks will throw a certain amount of $'s at them based upon today's price. Some rig builders might not be able to finance new construction but exploration and development hasn't taken a hit...YET. The time lines for these projects are years long so they can't be modified much in the short term (6+ months). Now if oil stays low for a year+ then we should start seeing some strategic changes.

Nationalization isn’t the big fear it use to be…at least for the very big companies like Exxon and Shell. Folks like Hugo can take away all the production they want from legitimate owners. But the World Court does function fairly well in such matters these days. It might take 15 to 20 years for an issue to be resolved but it does happen now. The biggest stick damaged parties have to use is the threat of legal action against parties who buy their “stolen” production. It is a meaningful threat these days.

Though it goes against my income potential I see a silver lining to any slow down in the development of new fields. This new production never was going to prevent PO but if current pricing stretches it out those projects another 5+ years they may be coming on at a truly critical time….not like the little hiccup we had last summer. They can never stop the inevitable but perhaps they’ll allow a softer landing (which will still likely be harsh IMO).