Recent reforms that would open oil exploration and development in Mexico to major oil companies for the first time in decades has the media all atwitter about the prospects of a reversal in declining Mexican oil output and a possible doubling of production. The reforms have brought out comparisons with Brazil which has a similar arrangement in which the country\’s state-owned oil company works with major international oil giants to develop Brazil\’s petroleum resources. Adding to the frothy atmosphere, former Brazilian President Luiz Inacio Lula da Silva proposed a partnership between Mexico and Brazil to develop oil resources in both countries.
In a world with daily average oil prices hovering near record levels, such news might be welcome if only we could actually count on the accompanying optimistic production forecasts. But, it\’s instructive to look at what actually happened in Brazil since the time its potential as a major new oil producer was touted several years ago.
Brazil had discovered large oil deposits in ultradeep (30,000 feet down) reservoirs far offshore. In 2009, Petroleo Brasileiro SA (Petrobras), Brazil\’s state-owned oil company, announced that it would invest approxmately $175 billion in oil exploration over several years to boost Brazilian liquid fuel production from 2.4 million barrels per day (mbpd) in 2008 of oil, biofuels and other liquids to 4.6 mbpd in 2015, a move that would make the country a major oil exporter.