Well shocking news will never cease. It would appear that two weeks ago, entire global crude oil narrative changed and changed radically. The problem is that nobody noticed. So just what the hell happened?
Brazil's national oil company Petroleo Brasileiro, AKA Petrobras, probably made the largest oil discovery ever in the entire history of the world. We're talking about something like 3.5 billion barrels of oil in the so-called Parque das Baleias area of Brazil’s Espirito Santo state. Something like 1.5 to 2 billion of those barrels are light sweet crude with an American Petroleum Institute gravity ranking of 30. It's about 180 miles off the coast, trapped under a few miles of sea water, rock, heavy oil and salt. This region is already producing crude oil. They made the discovery when {unexpectedly} they found light-sweet crude in two existing oil wells in one of their off-shore drilling rigs. The remaining 1.5 to 2.0 billion barrels are heavier grade oil which Brazil is already shipping to market. The fact that this region is already producing oil vastly simplifies the process of bringing this oil to market. The infrastructure (namely the drilling platforms) are already there.
Now, on Dec 2, we have a new announcement of another 2.o billion barrels in an ultra deep well, 1 mile below the ocean floor. This new field is just 80KM off the cost of Brazil. This latest discovery has increased Brazil's proven oil reserves to a total of approximately 14 billion barrels. The biggest problem in developing this resource is the falling price of crude and global credit crunch. Almir Barbassa, CEO of Petrobras, is said to be entirely focused on finding investment capital, rather than confirming or refuting the resource base itself.
So what the fuck does this mean anyhow? It means Brazil is the new Saudi Arabia. Brazil's current resources may exceed those of Saudi Arabia's diminishing resources. Rumors continue to abound that Saudi Arabia's production peaked several years ago. This means that they pumped more than 50% of their total resource base out of the ground. The remaining 50% will be much more energy intensive and expensive to harvest. Brazil's resources may be a heck of a lot easier to cultivate.
If true, the geo-political, economic and environmental ramifications of discovery cannot be overstated. It means a staggering power shift is in the pipeline, pun intended. What are these ramifications?
1. Oil scarcity will cease to be a function of diminishing resources for awhile (at least)
2. If there is oil scarcity, it will be politically motivated and executed.
3. With two Saudi Arabia's competing with each other, we can expect to see oil prices fall.
4. Dependency on the turbulent Middle East for vital energy will fall off.
5. With abundant cheap oil, the drive to alternate energy will abate (for a time).
6. We will keep burning fossil fuels, and greenhouse gasses will continue to accumulate
7. Ford, GM, and Chrysler may only need bridge loans. This may be a serious statement of fact after all. This when the claimed need for a bridge loan seemed like a Band Aid on cancer.
8. Because Brazil's oil reserves are offshore, there is no necessary destruction of rain forests in view. However, offshort drilling has its own environmental problems.
Wow... Wow... Wow...
There is much to consider. A reduction of oil prices to $30 per barrel would cripple our enemies, and provide $0.90 gasoline again. However, this is far from a clear cut good thing. I had expected the drive to alternate energy to be the prime source of economic growth in the near future for the United States and the world. An alternate energy economy may not even be financially feasible in the light of this current discovery. Further, continued consumption of oil, even at the current diminished pace, is not a good thing.
http://www.csmonitor.com/2008/1114/p01s04-woam.html
http://www.reuters.com/article/rbssEnergyNews/idUSN2145667320081121
http://www.bloomberg.com/apps/news?pid=20601086&sid=anInjkTYgWpk&refer=news
http://www.laht.com/article.asp?ArticleId=321153&CategoryId=14090