Surge in Brazil's Oil Production and New Argus FOB Price

Camila Fontana: What is behind the jump in crude production in Brazil? Oil output is expected to increase further, driven by its pre-salt fields and substantial investments in exploration and production. I am Camila Fontana, Deputy Bureau Chief of the Argus Office in São Paulo. Today I will discuss Brazil's production and markets with João Scheller, an expert on South America's oil industry who contributes to the Argus crude report. 

So João, first, welcome. We do know that Brazil's oil production is booming, and I want to ask you what is driving this growth?  

João Scheller: Thank you for having me here, Camila, as well. Brazil produced 3.9 million barrels a day of oil in August 2025. 

That is almost 4 million barrels a day of oil, an increase of 16.5pc compared to the previous year. So, it is a considerable increase that is going on in Brazilian crude production. And that is thanks to the production in the pre-salt offshore fields. 

They are the main contributors to that growth, accounting for 80pc of the total oil and gas output in Brazil. The Búzios field in the Santos Basin is the largest producer and it has over 800,000 barrels a day of crude production. And the production in the offshore fields of pre-salt have contributed to that increase, but also improvements in infrastructure that have helped to bring that production up. 

We have Petrobras' platform, Almirante Tamandaré, which started to produce oil recently and hit 225,000 barrels a day of production. That is its main capacity, it is the largest capacity, and that capacity was reached ahead of schedule. So, the production is growing, and it is growing faster than expected. 

CF: What is the destination of Brazilian crude and how is it different from other Latin American countries?  

JS: Brazil's main markets are China and Europe. We do have Brazilian crude going to different destinations. We have Brazilian crude going to the US, to India, to different markets, besides, of course, domestic refining. 

But the main markets are China and then, after that, Europe. Brazilian crude is largely sold on a delivery basis. That is one of its main characteristics. And what is a delivery basis? What is that? What does that mean?  

Well, it means that the price of a crude cargo also includes freight costs and sometimes insurance and any other costs involved with the transportation, with the logistics operation. That is unlike other countries in Latin America. We have Argentina, Colombia, Guyana. 

All those countries sell crude cargos on an FOB basis, on a free-on-board basis. What does that mean? It is the opposite of a delivery price. So, the buyer will be responsible to go to the destination, load its crude cargo, and take it to its destination. 

Basically, it does not include freight or any other costs. And why is that? Why does Brazil have this different form of selling its crude? Well, many reasons can explain that. For example, we have the fact that the crude market was not open to independent players until a few decades ago. 

And state-controlled Petrobras was responsible for most of the exploration and marketing of Brazilian crude. And, of course, such a large company was able to deal with the logistics by itself. But another important factor, and it is very important to mention it in the context of Brazilian production, is that to load Brazilian crude, producers have to use what we call dynamic positioning vessels, which are also referred to as DP vessels. 

CF: And why does Brazil use DP vessels?  

JS: The waters in offshore Brazil have such strong currents that producers have to use those DP vessels to offload crude from the platforms, so they don't risk hitting them. Those ships are equipped to adjust their position in water and to remain stable despite those strong currents that exist off the coast of Brazil. So, after the crude is loaded from the platform to the DP, the crude is then taken to a port or a ship-to-ship zone where the crude is transferred from the DP vessel, from the DP ship to the main cargo, the cargo that will be used to export it to its destination. 

So, of course, you can imagine that this adds a big degree of complexity and, of course, of cost to this whole operation. So that is another reason why producers already insert freight to their prices and sell Brazilian crude on delivery basis. They already have to deal with all those logistics. 

They might as well just deal with the logistics of taking the crude to its destination as well.  

CF: And in what ways Argus assessments help market participants understand the Brazilian market?  

JS: Argus already assesses delivered Búzios prices in Europe and the Tupi crude oil grade in China. Those are the two main Brazilian grades. 

We also have Mero, which is currently in production, but these are the two main grades produced by Brazil. And they are key assessments to understand the price of Brazilian crude in its two main destinations. But, of course, it is still very hard to understand what the FOB cost for Brazilian crude would be in comparison to other options in the region. 

As we mentioned, other types of crudes in the region, other countries, also sell their crude on an FOB basis. So that is actually the reason why Argus is launching an FOB price assessment for medium and sweet grades, Tupi, Búzios, and also Mero. So, this way it will be the idea of Argus to bring transparency to the market, as we always try to do, but also make it easier to understand the value of Brazilian grades compared to different options in the region, in different locations, and also help local refiners to understand the price of Brazilian crude. 

CF: What is the outlook for crude production in Brazil in the near future?  

JS: Brazil's crude production is expected to increase significantly in the near future. That is driven primarily by its pre-salt fields and substantial investments in exploration and production. Just to use as a reference, there is a study by the Energy Research Agency, EPE, that Brazil's oil production is projected to reach a peak of 5.3 million barrels a day in 2030. 

That will be driven primarily by the pre-salt deposits. The pre-salt fields that we already mentioned, are driving Brazilian production up now. But the country is also looking at exploring reserves in other areas. We can mention the southern Pelotas Basin and the northern Equatorial Margin. 

This one, the Equatorial Margin, is key to understand the potential of Brazilian crude oil growth. This area is in the north of the country, and it is near Guyana and Suriname. So, if you are familiar with the Latin American crude market, you probably know that Guyanese production has been growing a lot in recent years. 

We already know that in that area of the world, we do have proven big reserves of crude oil that are already proven. The start of exploration there could be key to a big increase in the Brazilian production as well. But the start of that exploration is taking a bit longer because it is near the Amazon forest. 

So, of course, it is a highly environmentally sensitive area, but it is taking a little bit longer. But once it starts, the Equatorial Margin is estimated to hold up to 10 billion barrels of recoverable oil equivalent. That could definitely take Brazilian crude production to the next level. 

CF: Great. Thank you, João, for bringing such an in-depth view of crude markets in South America. Thank you to the listeners of the Market Talks podcast series. 

We will see you next week.