Petrobras has announced the drilling of a second well on the Carioca discovery in the Santos Basin of Brazil in over 2000m water depth, drilling down to a target depth of more than 5km subsea. The previous discovery well flowed at 2900b/d of 27API oil and hit the hedlines after the Head of Brazils petroleum regulator claimed the field could hold as much as 33 milion barrels. Turns out this figure originated with a consultant to Houston based World Oil magazine who made some rough calculations based on his own maps. Other equally uninformed estimates put the field in the 1 billion-24 billion barrel range. Clearly a second well should help to narrow the reserve range. Carioca follows the nearby Tupi discovery in similar deep sub-salt geology where a 5-8 billion barrel range is more established. We need to put these discoveries in context with the 5 largest discoveries made in the world since 2000:
1) Kashagan, Kazakhstan (10 bn bbl)
2) Yadavaran, Iran (1.5 bn bbl)
3) Bongo, Nigeria (1.4 bn bbl)
4) Akpo, Nigeria (1.1 bn bbl)
5) Cachalote, Brazil (0.8bn bbl)
This shows that both Tupi and Carioca are significant recent discoveries. The last significant Brazilian discovery was made in the nearby Campos basin in 1998 with the 2.6 billion bbl Roncador field. The other thing to remember is the size of a billion barrels. Again in context - a million seconds is about 12 days whilst a billion seconds is over 31 years. But even if our optmimistic World Oil consultant is right, how does 33 billion barrels stack up on a global scale? The five largest oil fields ever discovered are (ultimate recoverable reserves):
1) Ghawar, Saudi Arabia (66-150bn bbls)
2) Burgan, Kuwait (32-75bn bbl)
3) Safaniya, Saudi Arabia (21-55Bn bbl)
4) Rumalia, Iran (19-30bn bbl)
5) Bolivar, Venezuela (14-30bn bbl)
So the recent discoveries in Brazil are significant and should help mid term crude supply but they are not going to significantly alter the world oil reserve picture.
So what difference to short term oil prices do the Brazilian discoveries make? In our opinion they probably push global peak oil production out from 2017 to 2018 but right now, not much difference given it will probably take at least 3 years to get the new Brazilian discoveries on stream. But short term oil prices appear always to have been as much a function of supply/demand perceptions as actual fundamental supply. The price for June Brent oil was $113/bbl on April 30th and as many UK newspapers and TV stations have pointed out, this is 68% higher than exactly one year ago. Recent prices have come off thir peak of $117/bbl of a few days before, possibly helped by the resolution of the Grangemouth refinery strike and a stronger dollar, but markets remain volatile. Recent comments by Chakib Khelil, Head of Opec who suggested that oil prices could hit $200/bbl and there was little they could do about it, do not help sentiment.
So the world may be running out of easy oil but a constant stream of billion barrel plus discoveries like those in Brazil should continue to ensure that oil supply is higher than oil demand - just.