Since being hit with the oil price collapse and various scandals, Latin America’s largest economy is now looking up, Gibson Shipbrokers said in a recent report.
Brazil now has a stream of offshore oil projects, due to come on line, while Petrobras is edging closer to to achieving the foreign investment needed to finish its stalled refinery projects.
Both of these developments will have far reaching implications for the tanker sector. For crude tankers, the main positive is that production growth is forecast to accelerate at least in the short term. However, thus far this year, production has failed to meet expectations.
Accelerating declines in mature fields has seen the Campos Basin fall to a 17-year low, according to a recent Reuters report. To a certain extent, these declines masked output increases from new projects, mainly in the Santos Basin.
Overall, slower production growth, field maintenance and mature field declines have seen crude exports running at 300,000-350,000 barrels per day below 2017’s figures for the first six months of this year, Gibson said.
Nevertheless, new project start ups are expected to offset mature fields declines in the coming years, with higher growth expected over the second half of 2018 and beyond. Recent IEA data suggested that Brazilian crude production will grow by nearly 900,000 barrels per day between 2018 and 2023 - positive for crude exports.
In recent months, usage of existing refinery capacity also seems to be rising. These higher refining runs have restricted crude exports, whilst at the same time, negatively impacting product trades.
Petrobras reported refined product output of 1,679 mill barrels per day in 1Q18, the lowest level since at least 2007. However, unofficial data suggests that runs may have risen by 200,000 barrels per day since then, assuming a utilisation rate of 85%.
Higher oil prices have forced the government to introduce fuel subsidies, making it more difficult for traders to import refined products, such as gasoline and diesel. This has negatively impacted on the products tanker market, most notably for tankers loading in the US Gulf, which has also been accentuated by similar developments in Mexico.
Despite this, future Brazilian downstream additions remain uncertain. Most of the country’s new refining projects have failed to materialise. For example, Petrobras has stopped work at the 150,000 barrels per day Compelj plant, whilst the 130,000 barrels per day expansion programme at Abreu e Lima has also halted.
The oil major has been courting investors to assist in the commissioning of these plants but it is likely to be a number of years before any major capacity additions come on stream in Brazil.
Brazilian crude is likely to recover from the lows seen over 1H18, as refining runs stabilise, oil field maintenance concludes and new production comes on line. This will be positive for crude tanker demand, but export growth could eventually be limited by refinery capacity additions, if and when these projects are commissioned.
In the clean tanker segment, much depends on whether higher refining runs can be maintained and if the government continues to ‘actively’ manage the price. However, Brazil will remain short on products for some time, even with capacity additions, meaning that the vast country will depend on clean product imports for the time being, Gibson concluded.
Meanwhile, according to a report from Platts, Petrobras is set to export a new grade of crude oil, known as Buzios, from the fourth quarter of this year.
It was said that exports of the new crude grade would be mainly directed towards China.
Buzios production commenced in April, 2018, in the pre-salt region of the Santos Basin, about 200 km off the coast of Rio de Janeiro, via platform P-74, according to a notice issued by Petrobras that month.
In addition to P-74, four more platforms will be allocated to this field between 2018 and 2021, each with capacity to process up to 150,000 barrels of oil and 6 mill cu m of gas daily, the company said.
Buzios is a medium heavy crude, rich in middle and heavy distillates, with an API gravity of around 28.4 deg. The sulfur content is around 0.31%.
The launch of this crude would ramp up Petrobras’ total exports to around 750,000 barrels per day in 2019, sources said.
In addition to Brazil’s traditional grades - Lula, Lapa, Iracema and Sapinhoa - independent refiner Tianhong Petrochemical bought 40,000 tonnes of Mero crude in June, after the first Mero crude was brought into China by Vitol in May.
Mero is a new crude with an API gravity of around 28.6 deg and sulfur content of around 0.32%.