The Brazilian government is analyzing an invitation made by the Organization of Petroleum and Allied Exporting Countries (OPEC+) to join the group. The topic is being analyzed by Mines and Energy Minister Alexandre Silveira. He said he will evaluate the invitation. However, Silveira stressed that Brazil cannot not make any commitment to cut production of oil, a regular policy implemented by the group in order to control the global price of this commodity.
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The Invitation
The invitation was made on Wednesday (27/11), during Lula’s visit to Riyadh, the capital of Saudi Arabia. It was formalized in a letter delivered on Thursday to the minister in Dubai, where he participated in the COP28 climate conference.
Term
Brazil has until June 2024 to give a final response to the invitation. Until then, he explained, the rules, statutes and processes relating to OPEC + will be analyzed.
Observer
Brazil was invited to make part of the group as an observer, who does not have the right to vote, and quotas are not imposed on these countries. Under this status, Brazil should be restricted to cooperation and observation.
Analysis:
Government technicians and diplomats, however, are against Brazil joining OPEC+. The assessment is that the country still has oil production on the rise and cannot join a group – even as an observer – whose objective is to set prices via production cuts. Furthermore, there are several companies operating in Brazil and there would be no way to determine cuts or increases in production even for Petrobras, a state-owned company with mixed capital. In addition, the environmental wing assesses that accepting the invitation will be bad for Brazil’s image, because the country would be joining a group of countries that do not want to accelerate the energy transition.
At Petrobras, however, the assessment is different. Sources consider that being in forums like OPEC is strategic, as it would guarantee information and power of opinion. One source considers that this could even contribute to the energy transition. Therefore, it would make sense for Lula to accept the invitation to join the cartel. These sources also emphasize that, as an allied member, Brazil would not have to adhere to the production cuts decided by OPEC.
