Tupi: Transforming Petrobras and Brazil

As a recent International Herald Tribune article details, while some of the world’s largest oil producers such as Mexico and Iran are struggling to remain exporters, Brazil is moving in the opposite direction.  The enormous Tupi underwater oil field discovered late last year (and blogged about here upon the announcement of such) has the potential to transform South America’s largest country into a sizable exporter and win it a seat at the table of the world’s oil cartel.  As the article notes:

“…The new oil, along with refining projects under way by Petrobras, the national oil company, could eventually make Brazil a larger exporter of gasoline as well, adding to supplies in the United States and other countries where it is all but impossible to build new refineries.

…Just a decade ago the notion that Brazil would become self-sufficient in energy, let alone emerge as an exporter, seemed far-fetched – even in the sunny beach city of Rio, where Petrobras is based. Petrobras was formed five decades ago largely as a trading company to import oil to support Brazil’s growing economy, which is now the world’s 10th largest and supports more than 185 million people….

….With Tupi, Brazil’s 12.2 billion barrels of proven reserves would increase to some 17.2 billion, putting Brazil ahead of Canada’s 17.1 billion and Mexico’s 12.9 billion. It would fall between China and Nigeria on a world scale, according to the BP Statistical Review of World Energy. Venezuela, by contrast, has some 80 billion barrels of proven reserves.

Rapid economic growth and declining oil production in oil-rich nations like Indonesia, Mexico and Iran are crimping how much they can sell abroad, straining the global oil market. In some cases, the governments of these countries subsidize gasoline heavily at home, which tends to encourage wasteful habits.

But Brazil, with an economy growing at a healthy clip, sells fuels to its citizens essentially at market rates…

…Petrobras sells some 90 percent of its refined products in the Brazilian market. To ensure a future as an exporter, Petrobras is building two new refineries scheduled to begin operations in 2010 and 2014, which will increase the country’s refining capacity by nearly 40 percent. The company is also investing in units that will expand its production of heavy crude oil into diesel, and is pouring $8.6 billion into reducing sulfur at its 11 refineries.

But its biggest challenge will be developing Tupi into a major production field.

…The first big task, Gabrielli said, is to find an outlet for the huge amounts of natural gas that are also in the Tupi field, which is nearly 200 miles offshore. Given the challenges of building a gas pipeline from such a remote location, Petrobras is considering building floating liquefied natural gas plants or a floating gas-fired turbine to generate electricity.

To get the oil to shore, the company’s engineers will need to find innovative ways to keep pipes warm and to develop stronger casings for wells to resist the effects of salt corrosion.

The new oil frontier that Petrobras and its partners – including BG of Britain – have discovered in the Santos Basin where Tupi lies may lead the company to scale back its spending in Africa and the Gulf of Mexico in favor of pouring more money into developing Brazil’s reserves. “The company will be overstretched and will have to revisit its strategy,” said Roger Diwan, a partner at PFC Energy in Washington….”

This entry was posted on Saturday, January 12th, 2008 at 12:16 pm and is filed under Brazil, Petroleo Brasileiro.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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