Brazil’s Ascendency as an Oil Power

by Craig Janis

Over the next decade Brazil may become one of the largest oil producing nations in the world. In late 2007 a new and sizable oil field, dubbed the “Tupi” field, was discovered in the Santos Basin in deep water off the Brazilian coast, and it holds the promise of energy self-sufficiency for Brazil. As Dilma Rousseff, a current presidential candidate and Chief of Staff to Brazil’s President Lula, put it, “This has changed [Brazil’s] reality.”

This news can only bolster Brazil’s rising reputation as an energy giant. The country is already a powerhouse of alternative fuels, owing to its status as the world’s second largest producer of ethanol fuel.

Brazilian officials with the state-owned oil company Petrobras have said that they expect to be able to develop the field with little outside help, and Brazil certainly has an interest in keeping profits from the field at home; early estimates are that the field will increase Brazil’s proven reserves to 17.2 billion barrels of oil. While that figure pales in comparison to the reserves of some traditional oil producers like Saudi Arabia (267 billion barrels) and Canada (179 billion barrels), it would put Brazil in front of countries like Mexico, Qatar, and Algeria, and place Brazilians firmly on the list of the largest oil producing nations. Furthermore, there is still potential for the oil field’s reserves to be even larger. Haroldo Lima, the head of the National Petroleum Agency in Brazil, estimated the size at 33 billion barrels, which would put Brazil’s reserves at a whopping 42 billion barrels and push it ahead of countries like Nigeria, Libya, and the United States.

Still, getting to the oil won’t be easy. Since it is a deepwater field, specialized equipment will be necessary. One estimate puts the cost of accessing the oil at $200 billion, which is no small investment, but it’s one that Brazilian officials are taking very seriously. Part of the high cost will be acquiring or building the deepwater rigs that can reach the oil. The rigs are rare and expensive to manufacture, and Petrobras officials have discussed the possibility of building the rigs themselves if necessary, but it is more likely that they would turn to their traditional suppliers in the United States. Similarly, Brazil will need to develop infrastructure to refine the oil. Since the country already does over $2 billion a year in trade of refined oil with India, it is possible that Petrobras might turn to India for expertise in building a refinery in Brazil.

Curiously, there has even been some talk that Brazil might build a nuclear-powered submarine to guard the oil field when extraction begins. This possibility was suggested by Brazilian Defense Minister Nelson Jobim, who said that Brazil needs “to choose the padlock that befits the riches in the safe.”

It will be interesting to see how this all plays out, but for now it suffices to say that Brazil is already in a great position to assert itself as an energy producing power, and its status is continuing to rise.