Brazil finds bumpy path on way to becoming world oil power

Brazil’s efforts to become one of the world’s major oil producers have attracted businesses such as U.S. drilling giants Halliburton and Baker Hughes, gained it partnerships with oil companies from India and China, lured immigrants from idyllic Norway and drawn investment dollars from American pension funds in Florida, South Carolina and California.

But the prospects for success have darkened in the seven years since Brazil first identified massive oil deposits in deep water off its coast. Many fear that Brazil’s chance to become one of the world’s major energy producers is fading as the global energy landscape changes dramatically.

Meanwhile, the world is not standing still. The United States is moving closer to energy independence, largely because of a revolution in natural gas production from hydraulic fracturing, or fracking, the controversial process of injecting water and chemicals into deposits deep underground. Mexico is about to open its long-closed petroleum sector to international investment, and countries such as Colombia are ramping up oil exploration and production. The opportunity to woo customers who are seeking new sources of oil during the sanctions on Iran already has been missed.

On a state visit in 2011, President Barack Obama offered what was seen as a major vote of confidence. “When you are ready to start selling, we want to be one of your best customers,” he said.

That was before widespread U.S. fracking changed how much oil the U.S. would require to import.

Now the future looks less promising.

Late last year, the first auction of drilling rights in the offshore Libra field, thought to hold 8 billion to 12 billion barrels of oil, fizzled after Brazil passed laws that required greater state control. Only one bid was submitted _ Magda Chambriard, the director of Brazil’s National Petroleum Agency, had said she expected 40 companies to participate _ and it won by default. The consortium that offered the bid included Petrobras, which took a 40 percent ownership stake, the European companies Shell and Total, and the Chinese companies CNOOC and CNPC.

Brazilians are told there are reasons to remain optimistic.

In March, Petrobras raised $8.5 billion in new corporate bonds in the United States in one of the largest corporate debt issues anywhere in recent months. The International Energy Agency predicts that U.S. oil production will begin declining again in 2020. By 2035, the agency predicts, Brazil will be producing 6 million barrels per day of crude, making it the world’s sixth largest producer and accounting for one-third of the increase in global oil production.

Full article: Brazil finds bumpy path on way to becoming world oil power (Miami Herald)

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