The Peak Moves

Brazil's days as an oil importing nation suddenly seem to be numbered.

A monster offshore oil discovery and promising fields near the find could help Brazil join the ranks of the world's major exporters, but full-scale extraction is unlikely until 2013 and will be very expensive.

The "ultra-deep" Tupi field off the coast of Rio de Janeiro could hold as much as 8 billion barrels of light crude, and initial production should exceed 100,000 barrels daily, though experts believe the amount will then go much higher.

State oil company Petroleo Brasileiro will start pilot pumping in 2010 or 2011 but it will take several more years for full production to get under way, at a cost of billions of dollars.

Petrobras says the Tupi field, off Brazil's southeastern Atlantic coast, has between 5 billion and 8 billion barrels.

Production could eventually top 1 million barrels per day.  This is the world's biggest oil discovery in seven years.  Until this discovery, Brazil ranked about 16th in the world in terms of proven oil reserves.  Now, Brazilian reserves are approaching those of the U.S., which currently sits 11th.  And if promising nearby fields pan out, Brazil will join the top 10, probably topping Nigeria and Libya. 

FYI, Petrobras owns a 65 percent share of the Tupi field, British Energy owns 25 percent and Petrogal-Galp Energia (of Portugal) owns the other 10 percent.

After Petrobras announced the find, government officials said they were removing from auction dozens of promising blocks near Tupi--so Brazil can keep the oil for Petrobras instead of selling it off to foreign international oil players.

Getting the oil out will be expensive and challenging. The Tupi field lies under 7,060 feet of water, almost 10,000 feet of sand and rocks, and then another 6,600-foot thick layer of salt.

Petrobras, however, is well-known for its experience in extracting oil from extremely deep offshore reserves. 

Besides being deep, the Tupi field is also over 100 miles off shore.  However, the field produces a light oil (low in wax), meaning it has a lower viscosity and is thus easier to pump.

It wasn't climate change but dwindling oil production and a weak economy that drove Brazil to become the world's leading producer and user of ethanol (though the U.S. passed Brazil last year).  It doesn't take subsidies for Brazil's ethanol to be cheaper than an equivalent amount of gasoline.  Thus, one would expect Brazil to export most of its newly-found oil.  Brazil is not a member of OPEC, so we'll have to see how it will manage the amount of oil it adds to the market.