TRADE-ENERGY: Brazil’s Oil Output Changes Trade Patterns

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Jul 25 1999 (IPS) - The possibility that Brazil could supply 100 percent of its consumer demand for oil within five years is changing the face of the regional fuel trade and widening the role of natural gas in South America.

Domestic oil production could expand to cover internal consumption in five years, and may even achieve a surplus for export within 10 years, according to Henri Reichstul, president of the state-run Petroleo de Brasil (Petrobras).

That expansion will be made possible by the loosening of Petrobras’ monopoly and the resulting participation of foreign companies in the local exploration and extraction of oil, beginning this year.

Petrobras has signed 19 partnership deals with private and overseas companies – which will funnel 2.44 billion dollars into these activities, previously the exclusive domain of the state company.

Brazil currently produces two-thirds of its daily oil consumption of 1.8 million barrels. The remaining one-third comes of providers like Argentina and Venezuela – which stand to lose these exports when Brazil becomes self-sufficient.

Argentina also exports a large quantity of natural gas to the Brazilian market, as does Bolivia – which transports its gas through a pipeline that began supplying the city of Sao Paolo on a trial basis this month.

Other pipelines, planned by private consortiums, will transport gas from northern Argentina to southern Brazil in the next few years.

Expanded use of natural gas will help Brazil’s oil industry to become entirely self-sufficient, and will absorb part of the increase in consumption, observed Reichstul.

The company Petroleos de Venezuela (PDVSA) may end up losing a major buyer of crude oil, but it will gain by becoming a partner of Petrobras for international operations, which will include both production and refining for the Brazilian market.

In addition, Brazil will become an importer of Venezuelan electricity.

In any case, the hub of energy integration in South America is drawing gas from both Argentina and Bolivia, making Brazil a “black hole” of consumption, said Alvaro Teixeira, secretary general of the Brazilian Institute of Petroleum (IBP).

Currently, natural gas accounts for just 2.8 percent of the energy consumption of Brazilians, which equals some 20 million cubic metres daily. The government’s aim is to push that number up to 12 percent by 2010.

Bolivia will provide 30 million cubic metres daily within eight years, a volume that could increase as a result of the discovery of new deposits, for which another pipeline will be built, said Petrobras.

The majority of the imported gas will be used in the generation of electricity, particularly in the southern and southeastern regions of Brazil, which have nearly exhausted their hydroelectric potential.

In the next five years, the construction of 24 thermoelectric centres are planned, which will generate 10,800 megawatts, 18 percent of the nation’s current capacity.

Energy consumption is growing at a steady rate in this country, in spite of the economic recession. In the first five months of 1999, it increased 1.3 percent compared to the same period last year, even though there was a reduction in the nation’s economic activity, especially its industrial output, says the state enterprise Electrobras.

But oil self-sufficiency “is only a possibility” and it may not be in the economic interests of the country because it depends on a complex combination of factors, warned Teixeira.

It requires heavy investments which are vulnerable to trends in the international market. Some aspects, like transport costs, refining capacity and quality of crude, may prove to be more efficient as imports, he noted.

Teixeira stressed that everything depends on the growth rate of the economy, beyond whether consumer demand continues to indefinitely grow.

But even if Brazil does keep importing, it will do it in “marginal” amounts that represent only a fraction of the world market, Teixeira said. (FIN/IPS/mo/dm/if/ks/mk/99)