MORE BOUNTY
The Economist, Apr 17th 2008
Could Brazil become as big an oil power as it is an agricultural one?
OF ALL the commodities Brazil exports, oil has long been an afterthought. Its oil reserves were reckoned to be relatively modest: about 12 billion barrels at the beginning of 2007, according to BP, or about 1% of the world's total. But last year, Petrobras, Brazil's partly state-owned oil firm, announced the world's biggest oil discovery since 2000: the Tupi field, which it hopes will produce between 5 billion and 8 billion barrels. Now the head of Brazil's National Petroleum Agency (ANP) says another nearby discovery might hold as much as 33 billion barrels, which would make it the third-largest field ever found. That alone would be enough to raise Brazil to eighth position in the global oil rankings-if these estimates are correct.
The ANP, which regulates Brazil's oil industry, was quick to distance itself from the remarks of its boss, Haroldo Lima. He spoke personally, not officially, it said, and reflected past reports in the media. Petrobras and its partners, BG of Britain and Repsol-YPF of Spain, said that they needed more tests to determine exactly how much oil it contained.
But no one dismissed the estimate as preposterous. That, plus the fact that a senior official had given credence to such a dramatic number caused the shares of the three firms to jump, despite the fact that Mr Lima claims he does not even know where the stockmarket is, and certainly did not intend to influence it. At one point, Repsol was up by 14%.
Both Tupi and the field mentioned by Mr Lima, Carioca-Sugar Loaf, lie beneath a thick layer of salt that is some 800km long and 200km wide. José Sérgio Gabrielli, Petrobras's boss, has hinted that there are vast reserves of oil to be found in this "pre-salt" formation. At any rate, Petrobras has struck oil every time it has drilled there. The firm's head of exploration says "there is practically no exploratory risk" in the area. Dilma Rousseff, its chairman, has breathlessly declared that Brazil will soon be on a par with Venezuela or Saudi Arabia.
The government must be thrilled at the prospect of the revenue from the new fields. But they will take many years and huge sums to develop (drilling a single well at Tupi cost $240m). And the extra income may also accentuate many of the weaknesses of the Brazilian economy-including a strong real and an overweening public sector.
