Energizing Brazil

According to Oil and Gas Journal (OGJ), Brazil had 11.2 billion barrels of proven oil reserves in 2006, surpassed in South America only by Venezuela. The offshore Campos and Santos Basins, located on the country’s southeast coast, contain the vast majority of Brazil’s proven reserves. During the first half of 2006, Brazil produced 2.1 million barrels per day (bbl/d) of oil, of which 82% was crude oil. Brazil’s oil production has risen steadily in recent years, with the country’s oil production in the first half of 2006 up 10% compared with the same period in 2005. As a result of its rising oil production, Brazil expects to become a net oil exporter by the end of 2006.

State-controlled Petrobras is the dominant player in Brazil’s oil sector, holding majority positions in up-, mid-, and downstream activities. The company held a monopoly on oil-related activities in the country until 1997, when the government opened the sector to competition and freed oil prices from state control. So far, Royal Dutch Shell is the only foreign operator of crude oil production in the country, with a single, relatively small field in the Campos Basin.

Petrobras controls over 95% of the crude oil production in Brazil. The largest oil-production region of the country is Rio de Janeiro state which has about 80% of Brazil’s total production. Most of Brazil’s crude oil production is offshore in very deep water and consists mostly of heavy grades.

Petrobras expands in oil production and refining

Petrobras has aggressively expanded production in recent years. In early 2006, it brought the Albacore Leste field online – this will eventually produce 180,000 bbl/d. Other 2006 production additions include the expansion of the Golfinho field (100,000 bbl/d increase), Jubarte (60,000 bbl/d increase) fields, and new production facility at the Piranema field (20,000 bbl/d). In 2007, Petrobras expects to continue this expansion by bringing up to three additional projects on-stream.

Transpetro, a wholly-owned subsidiary of Petrobras, operates Brazil’s crude oil transport network. The system consists of 4,000 miles of crude oil pipelines, coastal import terminals, and inland storage facilities. The overall structure of the network enables the movement of crude oil from coastal production facilities and import terminals to inland refineries and consumption centres.

According to OGJ, Brazil has 1.9 million bbl/d of crude oil refining capacity spread amongst 13 refineries. Petrobras operates 11 facilities, the largest being the 360,000-bbl/d Paulinia refinery in São Paulo.

Petrobras announced in March 2006 that it would build a new, $3.5 billion, 150,000-bbl/d refinery in Rio de Janeiro. The refinery, which will produce basic petrochemicals, will have special facilities to facilitate the processing of Brazil’s heavy domestic crude varieties. In February 2005, Petrobras signed an agreement with Venezuela’s state-owned Petroleos de Venezuela S.A. to build a new, 150,000–250,000 bbl/d refinery in the northeast Brazil at a cost of $2.5 billion. The companies expect to complete the facility by 2010, with each country providing half of the crude oil processed there.

Leading ethanol country

Brazil is the largest producer and exporter of ethanol in the world, producing 282,000 bbl/d in 2005. Over half of all cars in the country are of the flex-fuel variety, meaning that they can run on 100% ethanol or an ethanol-gasoline mixture. Ethanol in Brazil comes from sugar cane, which prospers in the country’s tropical climate.

In recent years, Brazil has sought to increase ethanol exports, especially to the United States. In 2005, Brazil exported 7,200 bbl/d of ethanol to the United States. To help facilitate additional exports, Petrobras announced a plan in early 2006 to build an ethanol pipeline from Goias, an interior area at the centre of Brazil’s sugar cane production, to São Paulo.

Increased interest in natural gas

OGJ reported that Brazil had 11.5 trillion cubic feet of proven natural gas reserves in 2006. The Campos and Santos Basins hold the majority of reserves, but there are also sizable reserves in the interior expanses of the country. In the future, Brazil hopes to increase natural gas production through an expansion of the domestic natural gas transport network and increased development of existing reserves.

Natural gas consumption is a small part of the country’s overall energy mix, constituting only 7% of total energy consumption in 2004. High oil prices have helped spur natural gas demand in Brazil. Natural gas is used mostly as a substitute for fuel oil in industrial and power-generating applications. The industrial sector represents about 80% of total domestic consumption. Domestic prices for natural gas are much lower than international fuel oil prices. Furthermore, the introduction of natural gas imports has led to a rapid growth in domestic consumption.

Petrobras is the largest producer of natural gas in Brazil. The company reportedly controls over 90% of Brazil’s natural gas reserves.

Petrobras is also the largest wholesale supplier of natural gas. In 2006, the company announced an ambitious plan to increase its natural gas production to 520 billion cubic feet by the end of 2008. Petrobras operates Brazil’s domestic natural gas transport system. The network has over 1,550 miles of natural gas pipelines, mostly in the southeast and northeast parts of the country.

Brazil imports natural gas from Bolivia via the 2,000-mile Gasbol pipeline linking Santa Cruz, Bolivia to Porto Alegre, Brazil, via São Paulo. Brazil also receives natural gas from Argentina via the Parana-Uruguayana pipeline.