Brazilian oil-producing states retaliated on Friday against multi-billion-dollar cuts made by Congress to their oil royalties with a wave of protests and threats to cut off most of the country’s oil output.
The actions threaten to poison relationships between Brazil’s states, saddle oil companies with losses and complicate efforts by President Dilma Rousseff to forge political alliances needed to pass legislation in the last 17 months of her term.
Airports in Campos and Cabo Frio, Brazil, key bases in Rio de Janeiro state for helicopter service to offshore oil platforms in the Campos Basin, were blockaded for up to six hours on Thursday, preventing oil workers from boarding flights to drilling rigs and production platforms.
In Brazil, the discovery of huge oil deposits has prompted a patriotic outpouring as Brazilians celebrate the country’s rise as an oil power.
Currently the world’s ninth largest oil producer, Brazil believes it may become one of the top four or five oil producers in a few years. But a recent spill 200 miles off the country’s famous beaches has brought home the pitfalls of deep-sea drilling.
On a recent fishing excursion, Alexandre Anderson put out about 2,000 yards of net in open water, just within sight of Rio’s famous Sugar Loaf Mountain. These days, though, the effort is hardly worth it.
Brazil‘s huge offshore oil wealth has been called a lottery jackpot, and each of the industry’s contracts is another winning ticket. But even with a lucky stub in hand, some companies risk going broke before they can claim their prize.
Lupatech (LUPA3.SA), Brazil’s biggest supplier of industrial valves and anchor cables, was counting on its place in a nascent oil services industry to guarantee a slice of the boom led by state-controlled oil company Petrobras (PETR4.SA) and its $225 billion (143.4 billion pound) five-year investment programme.
Instead, Lupatech is struggling to stay solvent. Petrobras business has been slow to materialize, and a cold shoulder from credit markets chilled by a looming European debt crisis, has put it at the mercy of key shareholders to avoid default.
In a report from Brazil, Margaret Warner examines how a country that already uses a great deal of energy from renewable sources is hoping to further develop its oil drilling reserves, even as the Gulf of Mexico spill raises new environmental concerns about deepwater oil exploration.
Once seen as cursed by its lack of fossil fuels, Brazil is now commonly depicted as an energy cornucopia.
The discovery of the vast “pre-salt” oil fields in the deep waters off the country’s southern coast, along with large volumes of potentially valuable gas, has raised the prospect that Brazil could meet all of its own energy needs and become a significant exporter of oil – and perhaps even gas.
However, while the opportunities are huge, so are some of the problems. The country faces an enormous challenge to deliver the reliable energy supplies needed to fuel its development and meet aspirations for improved living standa
The pre-salt fields are potentially huge oil deposits discovered two years ago off Brazil’s coast, beneath up to 7,000m of water, rock and a hard-to-penetrate layer of salt. Not only will they turn Brazil into a big oil exporter. They will also, the government hopes, finance the fight against poverty and deliver spending on education and other social goods that Brazilians badly need.
In a television address on Sunday night, President Luiz Inácio Lula da Silva made clear that he had two priorities for the pre-salt fields; to keep the oil in Brazilian hands and to ensure that its proceeds were spent on the Brazilian people.
In a rare interview, Ms Rousseff told the Financial Times how the government hoped to capture the pre-salt wealth. But its plans, outlined in draft legislation revealed last week, have caused dismay among many in the oil industry, who say they will deter the necessary investment.
Brazilian President Luiz Inácio Lula da Silva announced government plans to play a far bigger role in exploiting newly discovered oil reserves, a bid to grab a bigger share of the profits and fund an ambitious development agenda.
Calling it an “independence day” for Brazil, Mr. da Silva said in a radio address Monday that his goal was to “make Brazil become richer, more developed, from the scientific point of view, from the educational point of view, from the point of view of social policies. All of this because of oil.”