I n a single year, Exxon Mobil Corp has gone from being a tiny bit player in Brazil to the second- largest holder of oil exploration acre- age, trailing only state-controlled Petroleo Brasileiro SA. The last 24 concessions the US gi- ant bought with its partners may hold 41bn barrels, based on preliminary studies, according to Eliane Peter- sohn, a superintendent at Brazil\u2019s National Petroleum Agency, or ANP. While the existence of the oil still needs to be confirmed, along with whether its extraction will be cost- eff ective, it\u2019s a huge figure \u2014 almost double Exxon\u2019s current reserves. \u201cWhen you do the cumulative effect of all of those multi billion-barrel targets, then you come up with quite a material resource out there that has the capability to produce at very large volumes,\u201d Stephen Greenlee, Exxon\u2019s president of exploration, said in an interview in Houston on Wednesday. The world\u2019s largest publicly traded oil producer is betting Brazil will be at least part of the solution to its long- term challenges. Exxon\u2019s stock has under performed its Big Oil rivals over the past fi ve years due poor returns on historic investments, and production has declined year over year in eight of the past nine quarters. \u201cBrazil is the world\u2019s leading exploration play with \u2018yet-to-find\u2019 potential,\u201d said Tom Ellacott, a Madrid-based analyst for Wood Mac- kenzie Ltd. \u201cThere are only so many geographies that off er you the scale and low break-even price to compete if oil prices fall and are persistently low. Brazil is one of those.\u201d<\/p>\n\n\n\n
Exxon\u2019s meteoric rise in Brazil started in 2016 after the impeachment of then- president Dilma Rousseff . Under her left-wing government, the company held just two idle blocks in Brazil. Rousseff \u2019s ouster ushered in policy changes, a shift that deepened after her Workers\u2019 Party lost ground in Congress, and as the next president, Michel Temer, scrapped nationalistic laws and auctioned off exploration rights. Exxon overtook Royal Dutch Shell Plc, Total SA and Equinor ASA in exploration acreage in a matter of months during the record offering of new blocks. The friendly environment for Big Oil is expected to continue if far- right congressman Jair Bolsonaro is elected president, an outcome that looks more likely after his surprisingly strong showing in the first round of polling on October 7.<\/p>\n\n\n\n
His selection would reduce any risks of a policy reversal, according to most observers, even though the candidate hasn\u2019t spelled out his economic policies in detail. Whatever the political climate, \u201cBrazil has had a really good track record of honoring their contracts as they go forward,\u201d Greenlee said. \u201cSticking with the contracts gives us the ability to invest.\u201d The Irving, Texas-based company is betting big in particular on Brazil\u2019s offshore, where a single block is currently producing more than all of Colombia and profitability com- pares to the best US tight oil, ac- cording to Decio Oddone, the head of the ANP. Brazil has surpassed Mexico and Venezuela to become Latin Ameri- ca\u2019s biggest producer and has been a major source of non-Opec production growth in recent years. At the same time, spending constraints have prompted Petrobras to forgo its dominance in the so-called pre-salt, the oil deposits trapped under a thick lay- er of salt deep in the Atlantic seabed.<\/p>\n\n\n\n
The pre-salt has become too big for a single company to produce, Oddone said. That off ers well-funded majors like Exxon an opportunity. Before the recent investments, \u201cpre-salt Brazil was probably the biggest gap in Exxon\u2019s portfolio,\u201d Ellacott said. With its mammoth resources, the South American country offers some relief for the company, albeit over the long-term. Of Exxon\u2019s five major projects over the next decade, Brazil probably has the longest ramp-up to peak production, but it also offers the most potential, according to Ellacott.<\/p>\n","protected":false},"excerpt":{"rendered":"
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