Will Brazil Binge on Oil?

Brazil, a longtime leader in developing alternative energy for its transportation sector and its electricity, has recently discovered a truly gigantic supply of oil under its ocean waters. (Hmm, are we still so sure about peak oil?) Critics, meanwhile, fear that the nation’s forward-looking energy policies have just taken a big step backward and that the country will become just another oil oligarchy. [%comments]


Nosybear

Peak oil has more to do with the rate of discovery of new oil fields compared with consumption. I don't know how massive Brazil's offshore oil reserves are in relation to consumption but peak oil doesn't preclude discoveries of new fields, it just says there will be fewer discoveries and the fields will be more difficult as we exhaust the finite resource, oil. Or are you somehow questioning the finite nature of the oil supply? Peak oil is inevitable given the supply is finite, the only question is when it will happen, if not already.

ilze42

Considering how smart they've been so far, the smart money is on them using this windfall to apply a little pressure internationally. All the while retaining their own quest for sustainable energy.

I could be wrong though. There is always the danger of kid-in-a-candystore syndrome.

Its a wait and see game.

blin hog

Brazil; the land of the future, and it always will be. Those who study social groups recognize strengths and weaknesses in different communities. Brazil is a survivor culture, constantly on the edge of glory and catastrophe. It is sad and painful to watch. Oil wealth will be just another of the many examples of opportunities wasted.

Rob

"Hmm, are we still so sure about peak oil?"

Well I'd be tempted to suggest that if oil's been found under Brazil, then it's infinite.

DaveyNC

In order to answer that question properly, will Brazil binge on oil, I'd have to understand Brazilian politics better. I'm betting that, as we have Big Oil and Big Pharma, they have Big Ethanol and Big Agriculture to produce the ethanol. So, politically, it will be tough for them to use their oil. Economically, assuming they use the oil to assuage the population with cheap energy, just as most other South American and Arab countries do, then yes, they will binge. Either way, that whole peak oil thing just took another hard shot to the solar plexus.

I hope they don't follow the Venezuela/Chavez model, which seems to be so popular down there these days.

qingl

My understanding is that the reclamation cost of a barrel of oil from the Brasilian reserves is 240 dollars. So we might be waiting a long time until Brazil becomes an oil super power. At least until the oil sands run out and Canada has sat at the apex of oil producers. After all the break even point on oil sands oil is only about 100 dollars.

Don't hold your breath on your Petrobras shares to make you a millionaire.

Luca Alemar

First of all, sorry for my bad english.

Second, here in Brazil, we talk a lot more of how dificult it will be to suck the oil from the deep of the ocean where it lies, than how much oil there is, actually. We have the most advanced tecnology in off-shore oil extracting, but it´s not enough to do this job... it´s one of the deepest oil supply ever found, and the costs to bring it up are only justificable in a high price "oil peak" scenario. After all, ethanol-powered cars sales are all the way up these days here, noboby buys a new car that don´t run on gas AND ethanol.

John

In defense of this post, "Peak Oil" in this context means the idea that we have hit a peak oil supply. Arguing against this theory does not suggest that our planet's oil supply is infinite.

Nina

Also (from a Brazilian point of view, like Luca), we have to bring into the equation the aeolian energy factor. It is becoming a bigger and bigger 'rumor', and a more serious enterprise by the second. It is being seriously considered as a source of energy in the years to come.
I don't think Brazil will become the next Venezuela (democracy is currently too strong for that to happen) nor will it fall under the oil oligarchy category. I like what 'blind hog' said, about being a country that is so full of highs and lows that it is painful to watch. It's sometimes painful to live here, also.

The problem is that here in Brazil the oil company, Petrobras - even being America's 4th biggest company (http://bit.ly/MLA8w) - is controlled by the govenment. So, despite great technological advances, it is managed aiming political purposes.

On the other hand, alternative fuels - namely Ethanol - are produced by oligarchies. Most of new vehicles sold in Brazil today can use both fuels. This is giving even more power to the groups that control ethenol prices (which are adjusted according to sugar cane quotation on international commodities markets).

As we see, far from being a pure environmentalist discussion, it involves a political advantage the government is trying to get (by overemphasizing Petrobras' feats) versus the commercial interests of a long-established economical group (which, as it turns out, also has a strong political presence).

Besides, cargo transportation in Brazil today is disproportionately based on roads and trucks (which means diesel). Considering our continental dimensions, and the fact that industry is extremely concentrated in the Southeastern area, it's an strategic flaw not to have more railroads or fluvial transport.

Finally, it seems that these questions are viewed only through the lenses of political interests - never getting even close to environmental issues or utility theories.

Best regards, Rodolfo.

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Andre

Altho the cost of extracting the oil is extremelly high, Petrobras belives that investing in it now will pay off since it will take some good years before they are opperational.

By then lots can happen, and you can always count with instability in the middle east to make your oil more expensive.

Also, there are not enough ultra deep drilling machinery out there to do the job, they are ordering them from all around the world.

At the end of the day, they want to master this technollogy because they probably believe there are many more ultra deep oil pockets out there, and we have such a huge coastline that finding it is a question of time (if they exist, and it seems they do!)

Dave

Peak oil is a myth. Although the oil supply is finite, it is not limited to oil in the ground because we have synthetic oil. Plants produce oil, as do some algae. There are also fermentation-based ways of producing oil that do not require direct sunlight. There are some abstract limits, but the peak oil vision of running out will never happen. There is no peak oil, merely a transition from drilled oil to synthetic oil. Brazil may slow this transition down a bit or have some small effect on cost but is mostly irrelevant.

Rodrigo Hermosillo

I worry about the rise of the currency hurting their thriving, competitive and job prolific manufacturing industry.

truths:
1 - we are afraid that the American people will somehow take the Brazil, lying pretexts in order to greed on the oil and Amazonia
2-The environmental and social costs to produce ethanol in Brazil is enormous. The plants pollute the soil, air and waters in a manner unacceptable

Andrew

Macalé's comment is the first I've heard about anyone here being worried about America taking their oil. A more worrying and realistic prospect would be Sarney's moustache (and the corrupt paternalistic politicians in general) wasting it away.

Well, Andrew, if something can be said about our corrupt paternalistic politicians in general, and Sarney's mustache in particular, is that they are utterly available for sale, to the highest bid, here or overseas. The only problem America would have to buy them would be the current weakness of the dollar. Pay them with euros, yens ou yuans and you'll have them, easily.

hidden (that one)

political decisions can bring a lot of problem for Brazil and more for Petrobras when leading the pre-sand oil exploration...

as a former Petrobras consultant I could see what they did in the Procurement area, even finishing with all the strategy and the strategic sourcing team formed during the Fernando Henrique administration (previous Brazilian president).

If they do not change that the exploration cost will keep high and high while Petrobras spend $1 billion for hiring a exploration platform withou a bidding process...

Procurement there is a mess and the Oil sand exploration could be transformed in a 'sandinice' (means madness)... lets see

hidden (that one)

by the way... exploration cost in deep sea was around $4 before lula government... now is around $7... not to bad almost 75% increase!!!

fortunatelly we are improving the polictical environment...today we are teenagers and have a lot of way for arriving to the adult age.

but remember that we were a baby at the 1970's ending because the militar government, so...

lets see

Erico

You all don't even know Brazil. Come on...
Their oil i'ts gonna be good for everyone.

This is going to drawn my country lower than where the oil is.

The whole country closed his eyes for the others areas. "Amazon? Ethanol? Social Inequality? Northeast problems?"
No, no, no. Everyone has their eyes on this dirty thing. In my class of High School everyone says: Engineering College, my cousin is earning $4,000 dollars/month.

Brazil should not take the position it wants in the diplomacy(buying billion of dollars in planes, maybe) and economy before solving the first(and historically forbidden) social problems in the cities and countryside. Another important point, which the post commented, was the environmental progress. It will simply disappear.

When the next global crisis arrives, we will not have any protection from a social, economical, environmental and fuel(yes, oil will not be so lucrative in future) disaster, which is imminent. I should buy some books of Jeremy Rifkin and send to my dear-dumb president Lula.

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