In 1953 Brazil produced only 3% of the oil it needed. Consumption then was minuscule compared to the 2.2 mbpd it guzzles today. Yet at the end of 2007 Brazil turned a net exporter of oil.This turnaround is due to its remarkable success in drilling for oil offshore. Spearheaded by Petrobras, its giant state controlled oil company, Brazil has continuously added to its oil reserves. In the process Petrobras has become one of the world's leaders in ultra deep-water drilling technology, having the expertise to drill the ocean floor under up to two miles of water.
Added to offshore oil is Brazil's achievement in the field of developing biofuel. It is the world's largest producer of ethanol from sugarcane. It hopes to produce 6.97 billion gallons of ethanol this year, and plans to produce enough ethanol by 2025 to meet its entire domestic fuel requirements. Brazil's ethanol program was launched in 1975 by its military dictatorship, to cut dependence on foreign oil, which made up 90% of consumption. Brazil's ethanol industry is sugarcane based and produces 830% more energy than the fuel that goes into its production, compared to an energy gain of only 15% to 25% in manufacturing corn based ethanol as in the US.
Brazil is presently developing the Tupi oil fields in the Santos basin which hold an estimated 8 billion barrels of oil. Commercial production will start in 2009, almost a year ahead of schedule. The Carioca fields will start producing in 4 to 5 years time. Located to the south-west of Tupi, in what are called the Sugar Loaf blocks, they may hold up to 33 billion barrels of oil, according to Brazilian National Oil Agency director, Haroldo Lima. This would make it the third largest oilfield in the world, and marks the largest discovery of oil in the Western hemisphere since 1976. Other promising prospects are also located in the region. US companies such as Chevron and Exxon Mobil are also exploring the area. Brazil plans to increase its crude oil production to 4.2 mbpd by 2015 from about 2.4 mbpd at present. Petrobras plans to spend $15 billion on overseas acquisitions, including refineries, in an attempt to become an exporter of petroleum products rather than merely raw crude.
These new finds have lifted Brazil's reserves of oil and natural gas to 8th highest globally from 17th earlier. What's more, the oil found is the sought after 'light' variety instead of the usual Brazilian heavy crude found elsewhere.
The Sugar Loaf area presents enormous technical challenges of tapping crude lying beneath thousands of meters of rock and salt in an offshore location. But Brazil is confident that available technology is sufficient to develop the Tupi and Carioca oilfields. Petrobras has already announced a capital outlay of $112.7 billion over 5 years for their development. If the need arises this will be suitably increased, it says.
Although the impact of these developments on world oil markets in the short term will be negligible, it is clear that in future Brazil will no longer be limited to a medium size producer, pursuing self sufficiency, and maybe exporting a little. It will be a major player on the international scene, wielding all the influence such resources now command. The most significant result of Brazil's success is that it gives the world renewed optimism for such finds in future as well.
As far as the US is concerned in particular, it may be a welcome development as its dependence on Middle East oil will decrease. Brazil's increased influence may also help counter balance Venezuela's Chavez in Latin America. The Brazilian government has already indicated that it may act more responsibly than other oil rich nations. Its President, Luiz Inacio Lula da Silva has hinted that he wants to join OPEC. He says: 'We want to join OPEC and to try to make oil cheaper.'