Brazil's announcement that it has found new oil reserves maybe vast enough to give it OPEC-style clout is certainly good long-term news for its economy and the state-controlled oil giant Petrobras.
But Brasilia shouldn't be looking to elbow its way alongside neighbor Venezuela or the petro-rich Arab countries anytime soon, analysts warned.
That's because the precious oil and gas deposits lie deep undersea way off Brazil's southeast coast -- making recovery a costly and time-consuming prospect.
PHOTO: AFP
"Petrobras has discovered big amounts of oil. But that doesn't mean that Brazil will instantly become a member of the Organization of the Petroleum Exporting Countries [OPEC]," said Roberto Schaeffer, an energy specialist and professor at the Federal University of Rio de Janeiro.
Brazil's government and Petrobras announced on Thursday that tests had shown a promising area 250km offshore from Rio dubbed the Tupi field to be far richer than initially thought.
It holds an estimated 5 to 8 billion barrels of light crude oil -- enough to boost Brazil's national reserves by up to 50 percent.
Petrobras said other tests were still underway on a nearby zone that could prove even bigger.
The 800km-long area off the shore of Sao Paulo State might yield enough oil to put Brazil on the same level "as Arab countries, Venezuela and others," the chief-of-staff of the Cabinet, Dilma Rousseff, said.
The news sent the shares in Petrobras -- and in British energy group BG and Portugal's Petrogal-Galp Energia, which are its minor partners in exploiting part of the Tupi field -- soaring.
But by Friday, the celebrations quieted as thoughts turned to how to get at the oil.
In the case of the Tupi field, it lies 2km underwater -- and another 4km under the seabed, through rock, salt and sand.
"It's the first time we've gone this deep, and the technology is expensive," said Guillerme Estrella, director of exploitation and production at Petrobras.
"And we still have to study how to use the gas, because you can't just make a 250-kilometer long pipeline [to the shore],"he said.
The alternatives are generating fluctuating energy [using the gas to help pumping the oil] or liquifying it," he said.
"The costs are high, but the quantity of oil gives this investment robustness and viability," Estrella said.
Another expert, Adriano Pires of the Brazilian Center for Infrastructure, said "It's very expensive production, in deep water, which could only start in the best-case scenario in 2012 or 2013, and will only be viable if oil prices stay high."
Schaeffer said the Tupi find would likely mean Brazil would become independent in terms of oil production, no longer needing to import, he said.
But for it to become an exporter, the possible reserves in the second area will have to be confirmed.
The Brazilian government is putting its faith in the potential of the new area being explored. It has decided to withdraw from bidding 41 blocks that were to have been put up in its next round of offers.
Press comment have also suggested that the timing of the discoveries' announcement was opportune, coming as the Brazilan government is locked in negotiations with Bolivia over the supply of gas for its expanding economy.
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