Alternative Energy Powerhouse Brazil Finds Big Oil

Published on

Brazil, long proud of its push to develop renewable energy and wean itself off oil, has a bad case of fossil-fuel fever.

enormous offshore field in territorial waters — the biggest Western
Hemisphere oil discovery in 30 years — has Brazilians saying, "Drill,
baby, drill," while environmentalists fear the nation will take a big
leap backward in its hunt for crude.

There has been virtually no
public debate on the potential environmental costs of retrieving the
billions of barrels of oil, a project one expert said will be as
difficult as landing a man on the moon.

"The government is
whipping Brazil into a euphoria that this is going to be a solution for
all our societal problems," said Sergio Leitao, director of public
policies for Greenpeace Brasil. "Brazil is no longer seriously looking
at alternatives."

Home to the bulk of the Amazon rainforest,
Brazil for decades has developed alternative energy as an issue of
national security following severe energy shortages in the 1970s. It
uses hydroelectric power for more than 80 percent of its energy needs,
is the world’s largest exporter of ethanol, and nine out of every 10
cars sold in the nation can run on ethanol or a combination of ethanol
and gasoline.

A U.N. study found that in 2008, Brazil accounted
for almost all of Latin America’s renewable energy investment, to the
tune of $10.8 billion.

But since the national oil company
Petroleo Brasileiro SA, or Petrobras, discovered the massive Tupi field
off the coast of Rio de Janeiro two years ago — estimated to hold 5 to
8 billion barrels — it is the development of oil fields that has gone
into overdrive.

Thirty years ago, more than 85 percent of Brazil’s oil came from foreign sources. Today, it is a net exporter.

have been a series of other discoveries since Tupi — each lying at
least 115 miles (185 kilometers) offshore, more than a mile below the
ocean’s surface and under another 2.5 miles (4 kilometers) of earth and
salt. Estimates of the entire area’s recoverable oil range between 50
billion and 100 billion barrels.

Brazilian President Luiz Inacio
Lula da Silva hailed the finds as the nation’s future, a second
declaration of independence and an economic savior for 57 million
Brazilians living in poverty — 30 percent of the population. The
military wants new submarines and jets to protect the crude. Leftist
groups want it all nationalized.

The enthusiasm is also fanned by
Brazil’s devotion to Petrobras, routinely listed as one of the
most-admired companies in national polls.

Founded in 1953 to fend
off an economic crisis and dependency on foreign oil, Petrobras has
long embodied Brazilian nationalism and the notion of shielding
domestic wealth from foreigners — particularly the United States and

In 2008, Brazil’s total oil and natural gas production
was nearly 2.3 million barrels per day. Petrobras was responsible for
more than 96 percent of it.

"Most Brazilians think of Petrobras
like they think of their soccer stars," said Eric Smith, an offshore
oil expert at Tulane University in New Orleans who likened efforts to
get at Brazil’s oil to a trip to the moon. "Try to find Americans who
support Exxon like that."

Petrobras fattens government coffers with more than $30 billion a year in taxes and royalties.

company is led by Sergio Gabrielli, a bearded economics
professor-on-leave, who was jailed under the nation’s military regime
for his political activities. He defends the company’s environmental
record emphatically.

"Our ethanol program, our biodiesel program
is still there. Petrobras is allocating $2.8 billion dollars to develop
our infrastructure and production capacity for producing ethanol and
biodiesel," Gabrielli told The Associated Press at an economic forum in
Rio this spring.

The company’s record is not untarnished, however.

January 2000, a pipeline spilled about 350,000 gallons of crude into
Rio’s Guanabara Bay. Six months later, there was a spill at a refinery
near Curitiba in Brazil’s south — 1 million gallons of oil flooded two
rivers. In March 2001, explosions on what was then the company’s
biggest offshore platform killed 11 workers. The rig sank, releasing
more than 300,000 gallons of oil.

Petrobras quickly initiated a
$4 billion investment program to prevent future disasters and Gabrielli
says Petrobras can safely develop the difficult offshore fields.

Judy Dugan, a founder of, cautions Brazilians against embracing an oil company as a national benefactor.

said the track record of global oil companies shows none "truly have
the good of the citizenry first in mind. The oil business creates
corruption in many governments and large sources of political influence
for an oil company’s benefit, not for the benefit of citizens."

Senate recently opened an inquiry into corruption at Petrobras.
Opposition lawmakers say the company failed to pay more than $2 billion
in taxes and that it overpays firms with ties to the Silva

Silva swears Brazil will not go the way of a Venezuela or Nigeria, where petro dollars routinely mix with politics.

he is pushing a version of the Norwegian model, working to set up a
government-controlled oil fund for social projects that he argues would
operate with transparency. The opposition, however, fears giving the
central government control of such a fund would give it massive new
political influence.

Leitao, of Greenpeace, wonders if the
billions of dollars needed to develop the offshore finds will be worth
it should the price of oil fall.

"At the beginning of the 20th
century, we were the largest producers of rubber in the world. People
were lighting cigars with money," he said. "But the hangover came
quickly because the English started producing rubber in Asia. The
prices fell and our fortunes ended.

"We’re not looking at the lessons our own history has given us."

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases