Bolsonaro wants Brazil to accept Saudi invitation to join OPEC

DUBAI (Bloomberg) - Brazil’s president welcomed an informal invitation from Saudi Arabia for his country to join OPEC and said he’d be eager to accept.

The Saudi offer highlights Brazil’s growing importance as an oil producer as well as the challenge it poses to the producer group’s influence on crude markets. President Jair Bolsonaro said he received the invitation on Wednesday after holding meetings this week with senior Saudi officials including Crown Prince Mohammed Bin Salman.

“It is the first step for maybe putting in place this policy in Brazil,” he said on the sidelines of a conference in Riyadh. Bolsonaro said he needs to consult with his economic team and energy ministry before agreeing to join, adding in a panel discussion that he was keen for Brazil to accept the invitation.

Brazil’s burgeoning production is complicating OPEC’s effort to prop up crude prices in the face of booming supply from U.S. shale fields and weakening global demand. If it joined, Brazil could become the third-biggest producer in the Organization of the Petroleum Exporting Countries after Saudi Arabia and Iraq.

Big hitter. Brazil’s oil reserves are bigger than those of several OPEC members, Bolsonaro said. Brazil and OPEC could form “a great partnership,” helping each other to stabilize global fossil fuel prices.

Several countries have joined or left OPEC in recent years, but Brazil’s output dwarfs that of the organization’s newest members. Gabon re-joined OPEC in 2016, while Equatorial Guinea and Congo signed up in 2017 and 2018, respectively. Indonesia suspended its membership in 2016, saying it had become a net importer of oil. Qatar quit in January, and Ecuador said it would withdraw as of Jan. 1.

Brazil produced 2.71 MMbpd in 2018, according to the International Energy Agency, which forecasts the country’s average output to reach 2.9 million this year and 3.22 million in 2020. Brazilian crude production surged to 3.13 MMbpd in September, the IEA said its latest monthly report.

The Latin American nation seeks to expand its output capacity by auctioning new exploration licenses within days, Bolsonaro said. The areas it’s offerings are located in the per-salt, a giant expanse of oil deposits trapped beneath a layer of salt under the Atlantic seabed.

Exxon Mobil Corp., Royal Dutch Shell Plc and other energy giants are set to vie for the deposits, which could hold 15 Bbbl of oil, almost twice as much as Norway has in reserves.