Brazil Aims to Reverse Oil Deficit in 2008

It hasn’t been all Champagne and caviar in Brazil’s oil industry, where elation over the Santos presalt finds has been tempered by an elusive production target and the high price of oil imports.
The country, which just two years ago announced selfsufficiency for oil, has imported more barrels of oil equivalent than it has exported this year, creating a substantial trade deficit. As Brazil’s heavy crude exports are cheaper than its lighter oil imports, Petrobras’s bottom line has taken a serious hit. That has put pressure on the state oil company to boost production fast.
But Paulo Roberto Costa, Petrobras’s downstream director, is optimistic it will reach a trade surplus, which could come to $500 million by the end of 2008. Exports have picked up in recent months thanks to increasing domestic production, while decreasing diesel demand has slowed imports, lending credence to Costa’s forecast.
Domestic production figures have been something of a hot topic in Brazil. Some analysts are skeptical the company can meet its target of an average 1.95 million barrels per day this year, given recent operational problems. But last year the company started operations at five platforms, which are ramping up production, while another five are underway this year. If Petrobras does miss its market, it won’t be by much.
Meanwhile, diesel demand is falling due to climate conditions and government planning. Grid operators have switched off their oilfired plants, now that hydrology has improved reservoir levels following last year’s dry weather. And on July 1 hydrocarbons regulator A.N.P. began enforcing a mandate for diesel to include 3 percent biodiesel, further decreasing diesel consumption.

The scenario will likely improve since Brazil’s production should grow faster than demand, thanks to Petrobras’s discoveries. In addition, the country is expanding its heavy crude processing capacity, allowing it to consume cheaper crude while exporting lighter oil for a tidy sum. .