Hurricane season is far from over as we still have the rest of October as well as part of November. Over the past 2 months, we have seen substantial effects on gulf coast refineries. The Gulf coast offshore production makes up 1.5 million barrels per day (bdp) of oil output, which was all shut down last month due to Hurricane Laura, which lasted roughly from August 20th – August 29th.
Volatility in investing in oil and gas is nothing new, but the COVID-19 pandemic-driven demand destruction is forcing oil and gas companies to reassess the value of their biggest assets, proven reserves. Oil and gas companies have historically held faith in their reserves even during energy downturns, but this time feels different, and oil executives are starting to prepare themselves for large amounts of their oil and gas reserves to become totally worthless.
Last week, the Brazilian Federal Audit Court approved an oil auction that covers parts of the pre-salt zone offshore Brazil that was involved in a long dispute between the Brazilian government and Petrobras. The Brazilian pre-salt oil region consist of carbonates found below the salt layer. It’s oil-rich offshore reserve that is trapped below 2,000 meters of a thick layer of salt, where this layer of salt was deposited on accumulated organic matter, holding it for millions of years until thermochemical processes turned the organic layers into hydrocarbons (oil and natural gas).