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Brazil: An Oilfield Can be a Political Tool
Via NY Transfer News Collective * All the News that Doesn't Fit
The New York Times - November 19, 2007
http://www.nytimes.com/2007/11/19/world/americas/19braziloil.html
Brazil Discovers an Oil Field Can Be a Political Tool
By Alexei Barrionuevo
RIO DE JANEIRO, Nov. 17 ? With the price of oil hovering near $100 a
barrel, the discovery of the biggest deep-water oil field off the
southeastern coast has the potential to transform Brazil into a global
energy powerhouse and to reshape the politics of this energy-starved
continent.
While Brazil's state oil company, Petrobras, has known of the field for
more than a year, it only finished *****sing its full potential in
recent months. It announced on Nov. 8 that the field held some five
billion to eight billion barrels of crude oil and natural gas.
The announcement has everyone in the region, and beyond, taking notice.
A field that size ? the biggest in the world since a discovery in
Kazakhstan in 2000 ? is a potential political game-changer for Brazil.
In the next five years it is conceivable that Brazil could move ahead
of Mexico and Canada in total oil reserves, becoming second only to
Venezuela and the United States in the energy pecking order of the
Americas.
This is heady stuff for Brazil, a country that only last year became a
net energy ex****ter mostly because of its aggressive push into
sugar-cane ethanol and hydroelectric power.
"All of a sudden Brazil is emerging as an energy power," said Peter
Hakim, president of the Inter-American Dialogue, a policy group in
Wa****ngton focusing on Latin America. "Everything they have developed,
from soybeans to sugar to oil is suddenly working. They have had
amazing luck."
There is little doubt that the find gives Brazil new influence against
energy players like Bolivia and Venezuela, and not just in the economic
competition among energy suppliers, but in the political arena as well.
Much to the chagrin of the United States, Venezuela's president, Hugo
Ch!vez, has used his nation's oil wealth to aggressively push a leftist
agenda at home and abroad. The Brazilian field, known as Tupi, now has
the potential to lend more weight to Brazil's more moderate, leftist
approach.
Already countries around the region have been quick to sense the
potential threats and benefits. With news of the discovery coming just
ahead of a meeting of Latin American leaders in Santiago, Chile,
Brazil's president, Luiz In!cio Lula da Silva, acknowledged there
during the meeting that he was being "treated with a certain deference"
by the other leaders.
Mr. Ch!vez nervously jested that Mr. da Silva was now an "oil magnate."
He also quickly suggested that the two nations create an Amazonian
energy region similar to the Caribbean and Andean integration efforts
Venezuela had been pu****ng for.
"Now Lula has some cards to put on the table with Ch!vez," said Roberto
Teixeira da Costa, an economist who serves on the board of the private
equity arm of Brazil's development bank. "It is good to have some
counterweight in Latin America." It seems the discovery has already
given Mr. da Silva more confidence in standing up to Mr. Ch!vez and his
prot(c)g(c), the Bolivian president, Evo Morales.
Petrobras on Tuesday pulled out of a natural gas project with
Venezuela, citing "technical and economic reasons." It denied the
pullout had anything to do with the Tupi discovery.
A cartoon in the Brazilian newspaper O Globo showed Mr. da Silva
sunbathing atop an oil gusher one day, and breathing a black substance
into the face of Mr. Morales the next. "There's Lula, full of gas: be
careful Morales!" the caption read.
The turnabout is dramatic. Just two years ago Mr. Morales announced the
nationalization of his nation's energy reserves. The step was a firm
slap to Brazil, which had invested in Bolivia. Now analysts expect the
new field will allow Brazil to take a tougher stand in its negotiations
with Bolivia over new gas contracts and investments in Bolivia's
nationalized gas sector.
Mr. da Silva basked in the sudden possibilities, declaring that "Brazil
would obviously participate in OPEC," the global oil cartel, and
already felt free enough to weigh in on its politics, saying that the
organization should reduce oil prices.
He also insisted that Brazil would not "pull back even one millimeter"
from its push into biofuels. Brazil is sitting on the most abundant
farmland in the world, which it has been using a part of to produce
sugar cane for ethanol.
Not least, though the new oil will not be online for at least five
years, the announcement of the size of the field may help Mr. da Silva
blunt criticism at home that Brazil was heading into an energy crisis
because of a shortage of natural gas.
It has also raised hopes of easing the energy crisis among Brazil's
neighbors, notably Argentina and Chile, which have been struggling with
a lack of natural gas of their own.
Argentina has consistently cut off the flow of gas to Chile for the
past two winters, causing Chile to scramble to find supplies elsewhere,
and Bolivia's nationalization has raised doubts about its ability to
supply its neighbors' growing energy demand.
"Every country in Latin America is aiming for energy independence,
because they don't have that much trust in their neighbors," Mr. Hakim
said.
Just last week Michelle Bachelet, Chile's president, rejected an offer
from Mr. Ch!vez of subsidized gasoline for the struggling public
trans****tation system in Santiago. Ms. Bachelet said she was convinced
that Chileans could resolve the system's problems "ourselves."
Meanwhile, Petrobras, which has developed into a leading expert on
deep-water oil exploration, will have to work hard to tap the find.
To coax the oil from Tupi, engineers will have to drill up to 16,000
feet below the sea floor through salt and rocks, in water depths of up
to 10,000 feet, an undertaking that is at the frontier of the
industry's technological ability, according to PFC Energy, a
consultancy in Wa****ngton.
Even if the field turns out to be a good deal bigger than Petrobras has
estimated publicly, Brazil still could not match Venezuela's 80 billion
barrels of oil reserves. The Tupi field, if it holds at least 5 billion
barrels, could push Brazil past 17 billion barrels.
"This is oil that is promised for the future, not for today or
tomorrow," said Larry Goldstein, director of the Energy Policy Research
Foundation in Wa****ngton. "If I was Ch!vez I wouldn't be losing a lot
of sleep -- not yet."
*
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