[Marxism] Brazil and oil exploration

[Louis Proyect <lnp3@xxxxxxxxx>]

NY Times, November 19, 2007
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 assessing 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 exporter 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 
Washington 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 
Chávez, 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 Inácio Lula da Silva, acknowledged there during 
the meeting that he was being “treated with a certain deference” by the 
other leaders.

Mr. Chávez 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 pushing for.

“Now Lula has some cards to put on the table with Chávez,” 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. Chávez and his 
protégé, 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. Chávez of subsidized gasoline for the struggling public 
transportation 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 Washington.

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 Washington. “If I was Chávez I wouldn’t be losing a lot of 
sleep — not yet.”

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