ECONOMY-BRAZIL: Oil Rig Disaster Deepens Trade Deficit

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Mar 17 2001 (IPS) - A series of explosions on an offshore oil rig in Brazil, leaving one man dead, another gravely injured and nine disappeared Thursday, will hurt the already negative trade balance at a time when economic uncertainty reigns throughout the region.

Prior to the blasts, the P-36 platform produced 84,000 barrels of petroleum a day in Cuenca de Campos, some 200 km northeast of Rio de Janeiro, but its maximum capacity could have reached 180,000 barrels.

It is the largest offshore oil rig in the world, according to the government-run Petrobrás oil company, owner of the platform.

In replacing the lost production of P-36 with petroleum imports, the country will spend at least 35 million dollars a month at current prices, according to market analysts.

Brazil’s oil drilling endeavours expanded a great deal over the last two decades, but the country is not yet self-sufficient in petroleum.

Approximately one-fifth of Brazilian consumption depends on imports, constituting one of the leading contributors to the country’s trade deficit, which since January has accumulated to 556 million dollars.

Petrobrás president Henri Phillippe Reichstul predicts losses of some 400 million dollars for the state-run firm.

The P-36 platform itself cost 354 million dollars, but is covered by insurance from international corporations.

The oil rig was listing 30 degrees following the three explosions Thursday, but it is taking on water slowly, feeding hopes that it can be recovered – an effort that is “technically feasible,” says the secretary of maritime and petroleum industries, Wagner Victer.

The problem is the serious damage to the Petrobrás image, in addition to the drop in oil production. The public is up in arms due to the deaths and injuries, as well as the potential for severe environmental damage.

Sergio Barbosa, who was injured in the blast, is unlikely to survive because he suffered burns over 98 percent of his body, said the attending doctors. The nine workers who disappeared are not expected to be found alive, acknowledged Petrobrás coordinator in Cuenca de Campos, Carlos Eduardo Bellot.

In the last three years, 81 people have died in a series of accidents at Petrobrás installations, charges the Sole Federation of Oil Workers, the Petrobrás workers’ union.

More than 80 percent of those who died were not direct employees of the government-owned oil company, but worked for firms contracted to perform specific operations for Petrobrás.

The company’s policy to reduce its own personnel and to contract out the work may have contributed to the accidents, according to Antonio Spis, former president of the Federation.

The number of Petrobrás employees dropped from 58,000 at the company’s peak to 34,000 today, following massive layoffs in 1995, pointed out Fernando Siqueira, president of the Petrobrás Association of Engineers.

This implies a greater number of contract employees who likely lack the necessary experience and training, Siqueira explained.

In addition, haste in construction prevented better preparation of P-36 before it went into operation 10 months ago, meaning workers were not as familiar with the equipment as they could have been, the engineering leader pointed out.

Petrobrás is still digging out from a series of environmental disasters caused by major oil spills, such as those occurred last year in Guanabara Bay, in Rio de Janeiro, and in the Iguazú River, in Paraná state.

There are 1.3 million litres of diesel fuel on board P-36 that could spill, polluting the surrounding sea. But the risk is practically null, assures Reichstul. The petroleum that has been extracted does not pose an environmental risk because the wells have all been sealed off, said the Petrobrás chief.

The accident has triggered public outrage here at a time of high tension in the financial market – arising from the external threats of the crisis in neighbouring Argentina and possible recession in the United States and Japan.

The exchange rate of the Brazilian ‘real’ with the US dollar, on the rise over the last two weeks, reached 2.14 ‘reais’ Friday, a level not seen since the financial crisis two years ago that forced the government to drastically devalue the currency and adopt a floating exchange rate in January 1999.

The Brazilian financial market has responded with agitation to delays by Argentina’s new Economy minister, Ricardo López Murphy, in announcing measures to overcome the stagnation and fiscal difficulties confronting his country.

López Murphy faces strong political resistance, which could deepen problems in Argentina and would have immediate repercussions in Brazil, as the two countries are the larger members of Mercosur (Southern Common Market) in addition to being neighbours.

Brazil’s economy is considered to be in a good position currently, but several economists caution that it is vulnerable to external dynamics due to its deficit in the balance of payments, which make the country overly dependent on foreign investment.

The situation is aggravated by the trade deficit, which has not improved despite the January 1999 currency devaluation, and which will deteriorate because Brazil will now have to import more petroleum as a result of the oil rig disaster.