Brazil could be the World’s Next Oil Superpower

"Four miles under the ocean’s surface off Brazil’s lush coast lie billions of barrels of recently discovered light crude - a treasure that could transform the country into an oil superpower"

President Luiz Inacio Lula da Silva promises that the find will benefit all Brazilians.

RIO DE JANEIRO, Brazil - Four miles under the ocean’s surface off Brazil’s lush coast lie billions of barrels of recently discovered light crude - a treasure that could transform the country into an oil superpower. President Luiz Inacio Lula da Silva called it "a gift from God" and pledged to end chronic poverty and narrow the country’s broad gap between the rich and the poor.

But before rhetoric becomes reality, Brazil first must get to the underwater reserves, among the world’s deepest, and then manage a massive influx of wealth. It’s a formidable task that has left other national economies awash in corruption and even greater gaps between the rich and poor.

The nine fields discovered in the past year are thought to hold 50 billion to 80 billion barrels of light crude, more than four times Brazil’s current proven reserves. With the find, Brazil could supply all its own needs for nearly a century or become one of the world’s top oil exporters.

Even getting to that point will test the state-run oil company, Petroleo Brasileiro SA, or Petrobras, which has experience in deep-water drilling.

The fields will be the most complicated and costly it has developed. Analysts say the project will require at least a $600 billion investment over 30 years.

The deep-water reservoirs lie 185 miles offshore in the Atlantic, more than a mile below the ocean’s surface and 2 1/2 miles further under earth and corrosive salt. The salt beds can break loose and shear off piping, making it one of the toughest substances to drill.

Given those conditions, rough ocean currents and floating rigs, the technology required to tap Brazil’s "pre-salt" oil is on par with that needed to land a man on the moon, said Eric Smith, a drilling expert at the Entergy-Tulane Energy Institute at Tulane University in New Orleans.

"If you were doing this with a drill from atop the Empire State building, about 1,000 feet up, you’d be trying to hit a target on 34th Street the size of a quarter," Smith said.

But there are logistical problems beyond engineering.

The recent record prices for oil have led to global shortages of drilling equipment just when Brazil needs it most. The country will have to rent 138 drilling platforms - or build them for as much as $1.7 billion each - and find at least 200 ships to transport oil and gas over the next 30 years, a study by Brazil’s national development bank found.

The financial spillover could begin with Brazil’s dormant shipping industry and create tens of thousands of jobs, Silva has said. Petrobras will have to work with private partners, more likely through production-sharing deals than the current concession contracts it now favors, said Christopher Garman, head of Latin America research for the Eurasia Group consulting firm in New York.

Garman called fears of nationalism that once dominated Brazil’s energy industry overblown. Laws passed in 1997 broke the government’s monopoly over Petrobras, allowing foreign investors to buy stakes in 60 percent of the company. About 1 million Brazilian citizens hold shares, too.

News by Bradley Brooks (ASSOCIATED PRESS)