Alex Melchiore

11/3/2016
Dr. Tait Chirenje
Oil Reserves in Brazil
Oil drilling was only recently successful in Brazil. Many expeditions to find oil on land
did not turn up much success. This prompted Petrobas (at the time was one of the most trusted
names in oil) to start drilling offshore, and for them it was like striking a gold-mine. Petrobas
was highly successful and continued to improve and succeed with little political interference. Oil
output from these drillings was hugely successful; so much so that between 1996 and 2005 the
output more than doubled, and proven reserves of oil doubled as well in 2002. The 2007
expeditions turned up overwhelmingly huge finds in oil and Petrobas continued to rake in the
profits (Reid 195-199).
With all of this newfound success, Dilma Rousseff (who was a staff chair on Petrobas
board at the time) did everything in her power to guarantee that the state would tightly control
the new found bounty. She decreed that the oil would be the spilt between Petrobas and a new
state company: Pre Sal Petroleo SA (PPSA). The state also decreed that the much of the
equipment used would be made in state as well. They tried everything in their power to keep
everything within Brazil. This oil was vast but hardly easy to get to. The oil itself lied 2
kilometers beneath the oceans surface; the technology was not the problem but the whole
process was geared towards keeping the geologic formations from breaking apart and collapsing.
This required the oil to be ferried over to the mainland through the use of many tankers rather
than pipelined to ensure safety to the structures (Reid 199-201).
This process had created over 70,000 jobs by 2013 and kept Brazil the main beneficiaries
of the oil harvested. Another issue that arose was that the rate of inflation had a severe impact on

the production and export costs. Petrobas had to cut many operational costs if the exports were to
remain profitable (Reid 205-206).
Never the less, Brazil has become a major player in the oil market and has continued their
success vast success. However in recent years the oil production has been stagnant, more jobs are
being lost each year, and these continuing problems has made companies very weary on
investing because of this. Even with all of these problems, Brazil is still finding success. Their oil
reserve projections are still very high at 4.7 million a day within ten years. There is continuous
skepticism though. Petrobas (Brazils premiere oil company) constantly comes under heavy fire
with questions about whether or not they can handle the mother-load of oil that their projected to
take in. Sometimes the wells they drill come up dry and they have had to cut their losses and sell
oil below market prices which was designed to combat inflation. These stunts has costed
Petrobas about $20 billion since 2008.
Oil itself is a gold mine for a nation, especially when that nation has found a seemingly
endless supply. Brazils oil reserves have skyrocketed since their drilling began in the late
1990s. The question is: how long will their oil success last? True it turned up more than 700,000
jobs in 2013 and there may be even more workers needed the more the oil they find. However,
this success may give way to other markets such as Brazils ethanol market. It may seem like this
success will last for years to come but given Petrobas questionable business strategies and
drilling decisions, this may end up being a short-lived success unless Petrobas can get back to the
success they once had. Given that they have been able to produce an average of 300,000 barrels a
day is not promising. This vicious cycle of success and setbacks will continue to damage Brazils
reputation as a world player in the oil industry.

Sources:

Forero, Juan. 2014, January 16th. Brazils oil euphoria hits reality hard. 2014,

January 16th. Washington Post

Reid, M. (2014). Brazil: The troubled rise of a global power