Brazil prepares to become major energy nation
Oil reserves and a strong economy are two commodities that have always been intrinsically linked.
Brazil’s economy is already growing well thanks to strong domestic demand and now the country is looking at becoming one of the major players within the global oil industry as well, Statfor reports.
Currently Brazil produces more than two million barrels of oil a day and it is estimated that there could be between 70 billion and 110 billion barrels of oil located off the country’s Atlantic coastline.
The country is now looking to extract oil from pre-salt reserves, which are located deep beneath the sea bed. Previously a lack of expertise and technology meant that this oil was not accessible, however advancements in recent years make extracting this oil a possibility.
Petrobas, which is half state owned, is the firm charged with extracting the oil from below the seabed and steps are already underway to ensure that once production begins the profits will flow into the country and allow it to continue to improve.
Drilling on the pre-salt in the Campos Basin began in February and around 40 million barrels of recoverable oil reserves were discovered.
The current president Luiz Inacio Lula Da Silva is backing the plan and has said that he will ensure that the correct laws are put in place to allow the project to go ahead before he leaves office after the country’s general election in October.
Petrobas is already a huge force in Brazil and owns more than 100 production platforms and more than 16 refineries. The company estimates that by the year 2030 Brazil could be the biggest oil producer in the world.
Large amounts of foreign investment are likely to be attracted to Brazil by the pre-salt reserves and before this happens the country is keen to ensure four things, the news provider reported.
These are that the money required to tap into the oil resources is gained, Petrobas controls the project and most of the money goes to the state, the company continues to be a successful energy firm and, importantly for Brazilian property owners, the money gained is used to improve the socioeconomic disparities in the country.
A new company called Pre-Sal Petroleo, which would be 100 per cent state owned, could also be created to carry out further exploration work in the region. Earlier this month the Senate approved a draft law for the creation of the company.
Brazil is keen to reinvest the money it gains from the oil revenues into improving the country’s future potential for growth. Therefore 50 per cent of the money will go into a state-run socioeconomic fund, which will be spent on improving education in the areas of science and technology.
This will also help stop Brazil from relying too heavily on money from oil and allow it to continue to develop a strong and varied economy.
There has been some disagreement over how the money from the oil will be distributed among different areas of the country, however this issue is not likely to be addressed until after the October election.
Petrobas could also have issues with recovering this oil, as it has never drilled at such high depths before.
However, the company is not the only one which is looking to explore the potential of the Brazilian pre-salt reserves.
Royal Dutch Shell announced at the end of June that it has discovered oil in the pre-salt areas and that it plans to construct an additional ten offshore wells over the next 18 months, Dow Jones newswire reports.
While it is likely to be some time before the profits and investment from these pre-salt reserves trickle down into the economy and society in the country, the good news for Brazilian property owners is that the nation is optimistic about its future in the energy market.
