[Lymnempomma]

Simone Sebastian | June 25, 2012 06:15 | Global Post

Latin America’s biggest economy, Brazil, is betting on vast offshore oil treasures to leapfrog ahead of the world’s top
crude producers. But sometimes the obstacles seem too huge for the country to reach its ambitious targets. Meanwhile,
the fuel-guzzling United States hopes that a friendly country like Brazil will help wean it off an unhealthy dependency on
other, drama-prone oil suppliers. Will Brazil fit the bill?



RIO DE JANEIRO, Brazil — Billions of barrels of oil lying beneath Brazil’s crystal waters are poised to help transform the
Americas into the new Middle East.

Brazil’s national oil company, which uncovered the Western Hemisphere’s largest oil discovery in 30 years, has struggled to
tap the gusher as quickly as planned.

Sitting in the Rio de Janeiro headquarters of Brazil’s national oil company, Petrobras Chief Financial Officer Almir Barbassa
spoke soberly about the soaring plans that could turn Brazil into a global energy powerhouse.

Brazil believes its offshore oil will help double the nation’s reserves by the end of the decade, to 30 billion barrels.

Already, growing oil production in Brazil has fueled Petrobras' rise. The publicly traded corporation is 51 percent owned by
the national government. Forbes ranks it 10th on its list of largest public global companies, putting Petrobras in the same
tier as General Electric and Royal Dutch Shell.



It has funneled billions into deep water drilling research and earned a reputation as an international leader in developing
offshore technology.

Brazil’s oil production has surged over the past decade as government policies drove the national effort to reach energy
self-sufficiency. Production of liquid fuels has exceeded consumption since 2009, according to the US Energy Information
Administration.

If Brazil meets its goals, it could be shipping 1.5 million barrels of oil off its shores by 2020. At those rates, it would rival
the United States’ two largest Latin American suppliers — Mexico and Venezuela.

The US, the world’s largest oil consumer, is eager for new alternatives to the Middle East, where political upheaval threatens
its energy supply. President Barack Obama traveled to Brazil’s capital in March 2011 and applauded Brazil’s massive oil find.

But skeptics are questioning Petrobras’ lofty goals. Last week, the company cut its 2020 production target by more than
10 percent. The company projected its energy output would reach 6.4 million barrels of oil equivalent per day by the end of
the decade. Now it has reduced that estimate to 5.7 million barrels.

Further strangling expectations, the nation’s own energy needs are rising. Brazilians themselves are demanding more energy
as their expanding economy has put more vehicles on roads.

Besides requiring a rapid ramp up in oil field operations, producing the crude discovered in Brazil’s complex “pre-salt” offshore
formations requires billions in expensive technology investment.

Shipyard delays and workforce shortages also have exposed Petrobras’ challenges in reaching its target.

One stumbling block is legal. The business climate in Brazil, and the government’s extraordinary demands, are dissuading
some foreign investors.

Many of the equipment orders were contracted domestically, as officials push to develop Brazil’s nascent oil supply industry.
But there are growing signs that the fledgling shipyards and over-taxed workforce are struggling to meet the needs of Brazil’s
ambitious oil production goals.

The pressure on Petrobras extends beyond its ability to meet the rapidly growing demand for oil inside and outside of its borders.
Brazil’s general economic health is increasingly tied to Petrobras and the oil and gas industry.

Petrobras has budgeted $225 billion in global capital expenditures between 2011 and 2015. Of that, $140 billion is slated to be
spent in Brazil, Barbassa said.

The Brazil expenditure equals about 7 percent of the nation’s gross domestic product.

“The impact of Petrobras on the Brazilian industry is going to be larger from now on,” Barbassa said.