BAKU, Azerbaijan, Nov.6
By Leman Zeynalova – Trend:
Brazil’s OPEC membership can reduce international investors’ interest in this country, Francis Perrin, Senior Fellow at the Policy Center for the New South (PCNS, Rabat) and at the French Institute for International and Strategic Affairs (IRIS, Paris) told Trend.
Brazil’s President Jair Bolsonaro expressed interest in a Saudi proposal about Brazil's possible membership in OPEC. Brazilian president added that he would discuss this proposal with the relevant ministries in his country, especially the ministries in charge of economics and finance and of energy.
“Of course Brazil's national oil company, Petrobras, will also be part of these consultations. It is not sure that these entities will be very enthusiastic on this key issue. When a country becomes a member of OPEC its production level is decided by OPEC during the meetings of its Ministerial Conferences and no longer by the country itself,” said the expert.
Due to the development of several big oilfields in its deep and ultra-deep offshore Brazil is in a capacity to increase significantly its oil production and exports over the coming years and it is thus strategic, not sure that it would be in its national interest to become now or in the near future a member of the organization, which comprises 14 countries in Africa (7), the Middle East (5) and South America (2), according to Perrin.
He went on to add that such a membership could also have a negative impact on the country's attractiveness: international oil companies could be more reluctant to invest in Brazil if there is a risk that their future production may be reduced due to OPEC decisions.
“On the other hand, if there was a significant risk of falling oil prices, Brazil could think that the benefits of an OPEC membership would outweigh the disadvantages,” the expert believes.
This is while for OPEC Brazil's membership would be interesting because this country is one of the world's largest oil producers (the seventh-largest today) with 3.1 million barrels per day presently, said Perrin.
“If Brazil was an OPEC member it would be the third producer within the organization behind Saudi Arabia and Iraq and ex aequo with the United Arab Emirates. It would increase OPEC's market share on the world oil market, which is now about 30-35 percent (30 percent for crude oil only and 35 percent for crude and natural gas liquids). With Brazil OPEC's market share would increase to 33-38 percent on the basis of current production levels.”
He noted that another option would be for Brazil to cooperate with OPEC without being a member of the organization.
“Over the past three years (since end 2016), 10 non-OPEC countries are working with OPEC in order to try and regulate the oil market. These countries are Azerbaijan, Bahrain, Brunei Darussalam, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan and South Sudan. But, in any case, Brazil would face some constraints in its future production levels.”
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