Brazil is considering joining Opec as South America's largest oil producer looks to ramp up upstream activity along its offshore pre-salt reserves, the country's president said.
"I personally would very much like Brazil to become a member of Opec. I think the potential is there. We have enough oil reserves, actually larger oil reserves than some current Opec member countries," Jair Bolsonaro told the audience of the Future Investment Initiative in Riyadh. Brazil has received an informal request to join the group following a meeting with Prince Abdulaziz bin Salman, the Saudi energy minister later told Bloomberg.
Brazil, which has the second-largest reserves of oil in South America behind Venezuela, produces as much crude as Middle East producers such as Kuwait and the UAE. The country's production averaged 2.6 million barrels per day in 2018, according to the latest BP Statistical Review of World Energy.
The South American nation will launch a mega-auction of its offshore pre-salt reserves next week, from which the government expects to raise $26.6 billion (Dh96.7bn) in signing bonuses. Initial estimates by state producer Petrobras of the reserves, which lie underneath 2,000 metre layers of thick salt are said to hold some 6 to 15 billion barrels in place. Other estimates have placed reserves as high as 50 billion barrels. Petrobras also has conventional oil reserves of 5 million bpd.
Drilling for oil beneath layers of rock and salt is expensive, but there are "great opportunities" for potential bidders at the upcoming auction, Mr Bolsonaro said.
"In the next few years, Brazil would be the fifth- or sixth-largest oil producer in the world, which is very good because it will help stabilise oil prices," he said.
Brazil's addition to Opec would be welcome news for the group, which saw two members leave its fold this year.
Qatar, a founding member, announced its exit from the 15-member group in December 2018 and subsequently left on January 1. Gas-rich Doha, which has a relatively smaller production of oil, said it was withdrawing to ramp up its gas production.
Ecuador, one of Opec's smallest members, also announced its intention to leave earlier this month. The South American state plans to increase crude output to raise more revenues and has been a repeat violator of Opec+ production restrictions.
Opec+, as the alliance led by Saudi Arabia and Russia is known, has been cutting production since 2017 and has withdrawn 1.2 million bpd of supply since January, with the pact expected to hold until March 2020.
Oil prices were trading lower at 5.50pm UAE time, with Brent trading flat at $61.57 per barrel, while WTI was down 0.25 per cent at $55.40 per barrel as sentiment remained cautious about additional non-Opec supply coming onto the market.
Consultancy JBC Energy said in a note on Tuesday that non-Opec producers other than the US that are not party to the ongoing pact are expected to drive supply higher next year.
"We see steady crude and condensate production growth of around 1.5 million bpd from non-Opec [producers], excluding supply from non-Opec cut agreement participants," the note said.
Norway's production ramp-up in Sverdrup, as well as Brazil's pre-salt output, are expected to be the main contributors to increased supply, JBC Energy added.