ISSUES....
Inside,
confidential, off the record
Garthman
on Tupi
Our
friend Dennis Garthman is on the record this week with interesting
commentaries on
the huge Brazilian oil find.
The
most important news of last week was the "giant" oil
find acknowledged
by Petroleos Brasileiro (more commonly referred
to as Petrobras). The Tupi oil
find may hold, according to management,
as much as 8 billion barrels of
recoverable light crude.
The important note here is that this is "light" crude;
not sour, heavy
crude, but light, readily refinable crude. If this find is as it
has been promoted,
Brazil has suddenly leaped on the ladder of oil producers
to someplace between
Nigeria and Venezuela, and it moves Petrobras' total reserves beyond those
of Royal Dutch/Shell, and Chevron, lagging only behind ExxonMobil and British
Petroleum.
It may take five or six years before the crude from the
Tupi field moves to the market in viable form [Ed. Note: The "Tupi"
field
lies in what has been previously known as the BM-S-11 Santos Basin exploration
block.
We'll have a map in tomorrow's TGL.]. Petrobras owns 65%
of the field, Britain's
BG Group PLC owb 25%, and Petroleos de Portugal holds
the remaining 10%.
Regarding
the huge new oil find by Petrobras off Brazil's coast, one of
our friends at Citigroup (who shall remain anonymous,
but he knows who he is, so thanks Paulo!) has an interesting
take on why Brazil reported the find last week. Our friend noted
that
he is Brazilian and have followed the Brazilian market passively
throughout my career. [I] wanted to put to you some feedback
gathered from colleagues and sources of mine in Brazil on this
find. I am
becoming increasingly convinced that while the Tupi find is a
monster, the timing of the announcement interests me very much.
Allow me
to explain.
Bolivia's
Morales expropriated Petrobras's oil and gas assets in that country
and effectively nationalized the oil
industry last year in a highly publicized move to "level the
field" for the Brazilian poor. At the time Petrobras was Bolivia's
single largest external investor ... talk about biting the hand!
Since then, Brazilian-Bolivian relations have remained, shall we
say, 'strained', as Petrobras and the Brazilian government -- which
owns the majority of the company's voting shares -- attempt to
sort out a deal whereby the Brazilians can have some sort of secure,
contract-based involvement in the massive Bolivian fields, not
unlike what Conoco is attempting to do in Venezuela.
It
really is quite sad what Morales is doing, for though I believe
he means
well for his people, the argument of "taking fish now" versus "teach
and train a populace to fish for the long term" is at
the epicenter to whether Bolivia's natural resources will
end up either
like Mexican fields, which couldn't be a more sorry excuse
for field mismanagement and a shameful, wasteful decline
in production
from overtaxation and undercapitalization, or on the flipside
turn out like Brazil's energy industry which is now on the
map as one
of the world's best-managed, well-capitalized oil businesses
still effectively controlled by a federal government.
For more on interesting comments, you can subscribe to The Gartman
Letter by contacting Dennis Garthman: Phone 757 238 9346, Fax 757
238 9346 or dennis@thegartmanletter.com
Petroleumworld
11 15 07
ISSUES....
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