At the moment, the Gulf of Mexico owns the title of being the largest offshore oil production area in the world.
But not for long.
Back in 2009, Petroleo Brasileiro S.A. (PBR) – more commonly known as Petrobras – made history when it confirmed the location of a huge deepwater oil field in its Santos pre-salt basin.
Originally discovered by BG Group (OTCQX:BRGYY) in 2006 and situated 160 miles off the coast of Rio de Janeiro, the Tupi field is one of the largest oil discoveries in the Western Hemisphere in the last 30 years. It’s estimated to contain as much as eight billion barrels of recoverable oil.
Brazil’s ex-President, Luiz Inacio Lula da Silva, called the Tupi field "a second independence for Brazil."
He’s not wrong. And the story gets better, too …
In addition to the Tupi site, Petrobras also boasts the Jupiter field. Discovered in 2008, this is another huge find, located just 23 miles east of Tupi. The Jupiter field could be equal in size to the Tupi field.
In all, Brazil has a cluster of nine sites in the Santos basin. And if Petrobras keeps making new discoveries and continues to increase its output, offshore oil production in Brazil will surpass the Gulf of Mexico in less than five years.
Head east from Brazil and there’s another scenario playing out that’s trumping the Gulf of Mexico’s oil position …
Tullow Oil’s Twin Oil Discovery
Coincidence? Actually, it isn’t. You see, the offshore areas of certain parts of South America (off Brazil, for example) are geologically very similar to parts of West Africa (Angola, Namibia and Ghana).
Luman Sebastiao, a geoscientist for Angola state oil, commented at an OPEC meeting about the similarities:
"The Angolan and the Brazilian continental shelves have various similarities, as they have been joined for a certain geological period. Angola’s sub-salt reserves could be gigantic and even as big as Brazil’s.”
He’s right. It’s generally accepted that many millions of years ago, the two continents of South America and Africa were one large land mass. If you pushed the two together, they’d fit rather nicely.
Of interest to geologists – and more importantly, to investors – is that the areas where all the oil is being discovered (the sub-salt and pre-salt regions) line up together precisely. And they boast extremely lucrative potential.
Another important aspect of oil found in either of these two regions is that it’s very light oil. That is, it requires much less refining than heavy crude, or tar sands from Western Canada, for instance. That makes it worth more in terms of how much companies are willing to spend to go after it.
The bottom line here?
The King is Dead … There’s a New Ruler in Town
The Gulf of Mexico’s reign as "King of the Oilfields" will soon be over.
Instead, it’s time to switch your attention to the tens of billions of barrels of light, sweet crude waiting to be discovered offshore in both South America and West Africa.
And if you want a good starting point to get in on the action, you could consider positions in any of the three companies I mentioned above. (In fact, in an earlier issue of Investment U I profiled Petrobras in greater detail.)