Petrobras (PBR)

Brazil is much better positioned to endure the global oil production crash than oil-production-mature countries like the USA

giving Venezuela run for its money.

PBR is the national oil company of Brazil and the world’s 4th largest oil producer, recently reported that the new Guara field contains 1.1 billion to 2 billion barrels of recoverable oil and gas.

Sure, to reach that oil, developers must drill about 1.25 miles under the sea, and then through another couple more miles of rock and semi-liquid salt. And yes, the find highlights the technological complexities and high costs in exploiting this century’s new oil bonanza.

But it also comes on top of other massive discoveries that Petrobas and its partners have made in Brazilian waters, including:

• The Tupi field, discovered in 2006, with over 5 billion barrels of recoverable reserves.
• The Caramba field, discovered in 2007, with 934 million barrels of recoverable reserves.
• The Carioca field, discovered in 2007, with 867 million barrels of recoverable reserves.
• The Lara field, discovered in 2008, with nearly 3 billion barrels of recoverable reserves.
• The Guara field, discovered in 2009, with at least 1.1 billion barrels of recoverable reserves.

Say What You Want, but Petrobras has what It takes. With a capital spending plan of nearly $175 billion for the next five years, the oil company has stated that it will be able to fulfill its planned investments for the next five years with no need for additional capital, just as long as the price of oil stays at $65 per barrel or higher ^[1]

1. ↑ "Peak Oil and Petrobras" Article from InvestmentU

China Development Bank, one of China’s largest state-owned enterprises, has agreed to lend $10 billion to Brazil’s Petrobras (PBR) in exchange for a long-term supply of oil - the latest illustration of how Beijing is using the global downturn to further its domestic agenda.

Brazil is necessarily the country that comes to mind when taking inventory of the world’s top oil producers. It currently has about 12 billion barrels of proven reserves, but that figure could grow substantially now that a number of very rich deposits have been found off Brazil’s shores.

Petrobras happened across the second-largest oil find in two decades last year when it found between 5 billion and 8 billion barrels of untapped light oil in the Tupi basin. Even more impressive are the unofficial figures from a new reservoir, known as Carioca. That field could hold 33 billion barrels of oil and gas, which would make it the world’s largest discovery in at least 32 years.

With discoveries like these Brazil, currently ranked 13th on the list of the world’s top oil producers could, could easily move into the top ten.

The only problem with the Tupi and Caricoa oil fields is production costs. The Carioca discovery, for instance, is located 170 miles offshore, more than 6,000 feet under the surface of the water, and is trapped beneath a shelf of salt 500 miles long and 125 miles wide.

Developing oil fields such as these will be very costly and with crude oil trading below $40 a barrel financing is imperative. In that sense China couldn’t have timed its investment in Petrobras any better.

Petrobras said it plans to invest $174.4 billion from 2009 through 2013, compared with the $112.4 billion planned for investment for 2008-12. The company will invest $28.6 billion in 2009 alone.

Petrobras is leader in deep drilling technology and exporting such to areas like the Gulf of Mexico and other global areas

Securities investors are focused on the short term and will do well with this company in the 1-3 year time frame even as oil production peaks and crashes in all major world markets.

The Brazilian oil company is a rarity in the oil industry – it is actually adding vast amounts of oil and gas to its reserves. The unparalleled Tupi and Carioca oil fields along with the Jupiter natural gas field are a game-changer for the country and the company.

A long term competitive advantage is the monopoly in Brazil which acts like a moat against other new or existing companies that wish to take some market share in Brazil.

Brazil is functionally corrupt. They will continue to be successful in protecting their oil market from outside penetration because there is an even greater gap between the haves and have nots and this makes corruption even more "functional" for those who benefit (like PBR)when compared to other corrupt oil oligopolies like the USA.