Profiting From Brazil’s Tupi Oil Field: Petrobras (PBR), BG Group (OTC: BRGYY)

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 3

By Guest Author: Robert Williams, PhD, P.E.
How and why invest in Brazil. The why is directly connected to the massive oil/gas finds offshore Brazil in the last couple of years but also because of its well-established agricultural and mineral economy. The oil and gas developments projected for the next decade will further enhance their global economic stature. Brazil is the fifth largest country by geographical area in South America and it occupies nearly half of South America. Brazil is the fifth most populous country and the fourth most populous democracy in the world. Brazil was a colony of Portugal until its independence in 1822. Brazil is the world’s tenth largest economy at market exchange rates and the ninth largest in purchasing power. …

One quick and easy way to invest is Brazil’s ETF EWZ. See the chart below as to why the timing may be about right to invest in this ETF.

brazil_ewz

Another way to invest in these projected Latin American economic developments is to buy shares of Brazil’s state-controlled oil company (Petroleo Brasileiro Sa Petrobras ADR – PBR).  (Tate Dwinnell Edit: I’d like to add that that while PBR is a great long term idea, in my opinion it’s overbought after nearly doubling off the lows.  I recently took profits on a position in this and am looking to get back in on a return to around the 50 day moving average around 24 – 25)

21609_petrobras_pbr

PBR’s Tupi field may contain as much as 8 billion barrels of oil and natural gas, an amount that could boost the country’s reserves by 62 percent. Recent news releases indicate that crude oil production from the Brazilian offshore fields Tupi, Guara and Iara is commercially viable, even below $40 per barrel oil price. Oil production from Brazil’s massive new oil fields, which are in very deep water and buried beneath a thick layer of salt could start producing at 14,000 barrels of oil a day within second quarter 2009. The first full production phase of Tupi, using a floating production, storage and offtake vessel (FPSO) pumping 100,000 barrels of oil equivalent per day by 2010 has already been sanctioned with a budget of $3.7 billion. Additional FPSO’s will be added up to a maximum of 10 vessels eventually producing up to 1 million BOPD. 40 trillion cubic feet of gas present in the offshore oil fields will allow peak gas production from Tupi alone of 1 billion cubic feet a day,

The Tupi field is located approximately 200 miles off the coast of the State of São Paulo and at over 6000 feet of water depth, with well depths of nearly 15,000 feet.

Major capital investments are required for oil development if you consider that 10 FPSO’s are required at $3.7 billion each with ultra deep subsea well drilling adding additional costs. However, the ultra deep sea technology is well established for Gulf of Mexico, offshore Nigeria and other global developments.

Brazil’s major offshore discoveries present geo-political and economic considerations since the light crude oil is much more desirable for US and Brazil’s refineries than the heavier crude oil produced by Venezuela and Brazil.

There is a third way to invest in Brazil’s oil and gas economic development which provides global diversification in the oil and gas industry covering oil, natural gas and LNG. This is UK-based BG Group with a 25 percent stake in Brazil’s offshore fields.

BG Group plc (OTC:BRGYY; BG -London) has operations in UK, Italy, Kazakhstan, Norway, Algeria, Libya, Madagascar, China, Malaysia, Singapore, Egypt, India, Israel, Palestine, Nigeria, Oman, Philippines, Thailand, Tunisia, Argentina, Bolivia, Brazil, Canada, Alaska, Chile, Uruguay, Trinidad and Tobago and the United States. On November 14, 2008, BG Group acquired a 90% interest in Queensland Gas Company Ltd.

BRGYY just released record earnings up 74% with a dividend increase of 20%. The earnings press release identified “strategic progress in Australia and Brazil that will support BG Group’s growth over the next two decades.”

bg_group_brgyy

See more on oil trading and ETFs at Oil ETF Central

Author Bio: Robert Williams 40 plus years experience includes oil/gas engineering in crude oil/petroleum products/natural gas, refining, processing and pipelines on all continents, except South America and Antarctica, from Alaska and Australia pipelines to S.E. Asia offshore, from UK North Sea to Los Angeles fuel truck racks and from Romanian pipelines to West Africa FPSO.

More on this topic (What's this?)
Comparing U.S. Oil Production To Select Countries
A Quick Post on Brazil
Simple Reason Why Oil Will Bounce Here: Duh!
Read more on Investing in Brazil, BG Group PLC, Oil at Wikinvest

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Comments on Profiting From Brazil’s Tupi Oil Field: Petrobras (PBR), BG Group (OTC: BRGYY) »

February 17, 2009

Robert I Williams @ 12:59 am

Thank you Tate for pointing out the overbought situation. These articles are intended to identify potential investment opportunities. It is up to each investor’s Trading Plan as to market timing.

February 20, 2012

PRAKASH LALWANI @ 3:25 pm

CURRENTLY WITH SANCTIONS OUT TO IRAN I THINK WE CAN SEE OIL MOVE HIGHER

February 22, 2012

Kenny @ 1:37 pm

So is this a legitimate stock to invest in, and if so how would one go about purchasing stocks and how much would each share cost? Does the term overbought mean too many have invested in this stock already? I am interested but I don’t want to regret any moves I make if possible. Thanks Ken

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