Bolsonaro keeps Opec option alive despite hurdles

As a rising non-Opec crude supplier, Brazil would add substantial weight to the producers' group. But membership could also create challenges for growth in a country where there is an increasing diversity of producers aside from Brazilian state-controlled Petrobras.

"I had an invitation from a country in the Middle East to join Opec," Bolsonaro said today, without identifying the country. He said he would discuss the "pros and cons" of membership with Albuquerque in next week's meeting.

In what appeared to be extemporaneous remarks, Bolsonaro told delegates at the recent Future Investment Initiative Forum in Riyadh that he would be open to joining the organization, but would require the input of his advisers before taking any decision.

While Albuquerque appears to be open to the possibility, Bolsonaro's pro-market economy minister Paulo Guedes said Brazil could discuss participation in Opec meetings as it has in the past, but would not participate in efforts to manage the oil price through supply quotas.

"Brazil is one of the largest oil producers. Now, we have our convictions. Just like other western liberal democracies, we would never favor using cartels or strengthening cartels to corner democracies that live on oil," Guedes said.

The comments were made today in Rio at a signing ceremony for a critical amendment to a 2010 contract that granted Petrobras exclusive rights to produce up to 5bn boe from the Santos basin pre-salt cluster known as the Transfer of Rights (TOR).

The signing of the revised contract was a prerequisite for Brazil's sweeping 6 November auction of around 15bl of oil equivalent of pre-salt reserves in the TOR.

Petrobras chief executive Roberto Castello Branco called the amendment a "great victory" after years of complex negotiations aimed at adjusting for changes in the commercial value of the reserves.

Under the revision, the federal government will pay Petrobras around $9.1bn, all of which the company plans to use to pick up more reserves in the TOR auction.

Oil executives in Rio have been baffled by Bolsonaro's decision to consider entry into Opec just days before the R106.5bn ($27bn) TOR auction and a sixth production-sharing round covering five pre-salt blocks that will take place the next day.

Thanks to extensive pre-salt reserves offshore, Brazil's crude output is approaching 3mn b/d, and is projected by the government to reach 5.5mn b/d in 2030. Opec membership would call the country's aggressive forecast into question.

In the past, Brazil's mines and energy ministry has sat in on high-level Opec and non-Opec meetings. But it has said that under Brazilian law and contracts, the federal government — the controlling shareholder of Petrobras — cannot interfere with the production of contracted companies.