Oil-rich Brazil eyes spot as top exporter

Brazil’s recent oil discovery threatens to knock Venezuelan President Hugo Chavez off Latin America’s oil throne and possibly snatch Venezuela’s title as the Saudi Arabia of the Western Hemisphere.

Enough oil is tucked deep below the ocean off Brazil’s coast to turn the country into a major oil exporter, and the Brazilian government is recrafting its oil policy with the U.S. as a potential market, many analysts say.

Containing 8 billion to 12 billion barrels of reserves, the Tupi and Iara fields lie buried under layers of rock and salt beneath the ocean floor, about 170 miles off Brazil’s southeastern coast. They are thought to be the largest crude discovery in the Americas since Mexico’s oil discovery 30 years ago.

“Every major company wants to be there because this is a vast field and Brazil is a stable country, unlike Venezuela or Saudi Arabia,” said Paulo Sotero, director of the Brazil Institute at the Woodrow Wilson International Center for Scholars.

“Brazil has a dynamic, open system and doesn’t have a Chavez,” he said, referring to Venezuela’s anti-American president, who occasionally threatens to limit oil sales to the U.S. but has never done so.

Brazil still has a long way to go to catch Venezuela, which has reserves of up to 100 billion barrels, according to the U.S. Energy Information Administration.

But most of Brazil’s oil has been discovered in the past five years, with some private analysts giving wildly optimistic estimates of more than 50 billion barrels waiting to be discovered.

A spokeswoman for the Brazilian Embassy in Washington cautioned that the country has just 15 billion barrels of proven reserves and called the higher numbers purely speculative. She asked not to be named, keeping with official embassy policy.

The U.S. imports two-thirds of its crude oil, primarily from Canada, Mexico, Saudi Arabia and Venezuela.

But Venezuela’s tough restrictions on outside companies imposed by Mr. Chavez and Mexico’s waning oil supplies, mean Brazil’s oil could be a boon for the United States, said Mr. Sotero.

Brazil’s national energy company Petrobras thinks it could double its exports to the U.S. by 2015 and is currently looking into revamping a refinery in Pasadena, Texas, said Chris Garman, a director of the Eurasia Group.

Brazil has already achieved self-sufficiency in meeting its own energy needs, owing to an aggressive biofuels program and hydroelectric power, meaning that additional oil would be available for export.

Two years ago Petrobras discovered the Tupi and Iara reserves. But until now, it had avoided creating policy to extract the oil, in part because of the financial crisis but also because of technical difficulties. The oil lies below a layer of salt, an obstacle for deep-water drilling because it is less stable than solid rock.

Now the government is “moving with a vengeance” to craft the legislation that will enable Brazil to best take advantage of the bounty, Mr. Garman said.

Brazil’s government recently set up an inter-ministerial group to set up drilling policy, and Petrobras plans to invest nearly $30 billion in the region by 2013 and $111 billion by 2020.

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