Off Shore Brazil & Peak Oil

Last week it was reported that Brazil's national oil company Petrobas had made one of the largest oil discoveries in the last 30 years. Reserves of 30 billion barrels were reported in many newspapers. The oilfield in question is the Carioca oilfield which is about 270 km off the coast of Brazil. The test well drilled below 2000 m of water and then through around 7000 m of subsea rock followed by another 1000 m of salt layer. These wells are an engineering feat as well as expensive. Petrobas has backed away from any official claims as to the likely reserve volumes and said more detail would follow after 3 months of drilling.

If the 30 billion number does turn out to be true, then this of course would rank as a large discovery. Last year the Brazilians discovered a similar offshore oil field named Tupi with estimated reserves of 10 billion barrels. With hindsight we know that most of the world's giant fields were discovered before the 1970's. Almost all the discoveries since that time have been smaller and progressively lower quality. For comparison, the largest oilfield in the world Ghawar in Saudi has reserves of around 170 billion barrels. The reserves number of 'original oil in place' (OOIP) is a bit misleading because even with the most modern technology, most oilfields will yield only 30-60% of the OOIP.

Unfortunately even if the Carioca field had 30 billion barrels of reserves and they could access all of it, this would last the world barely over one year. [30 billion/ 85 million b/d=353 days] Of course the biggest physical limiting factor would be the production rate. I would predict that offshore oil platforms of this complexity wouldn't yield the flow rates that would make any significant impact on supply/demand fundamentals. The tar sands of Alberta are a case in point. Their estimated recoverable reserves is around 300 billion barrels. Production rates from North American independent oil firms working in Alberta recently surpassed the one million barrels per day mark!

So if I had to bet, I would still be long energy.