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Brazil Seeks More Control of Oil Beneath Its Seas, With Long-Term Risks
By ALEXEI BARRIONUEVO | The New York Times
Faced with the world's most important oil discovery in years, the Brazilian government is seeking to step back from more than a decade of close cooperation with foreign oil companies and more directly control the extraction itself.
The move is part of a nationalistic drive to increase the country's benefits from its natural resources and cement its position as a global power. But it could significantly slow the development of the oil fields at a time when the world is looking for new sources, energy and risk analysts said.
This month, Brazil's government said it wanted the national oil company, Petrobras, to control all future development of the deep-sea fields discovered in 2007, which international geologists estimate could hold tens of billions of barrels of recoverable oil. The change would make Petrobras the operator for the 62 percent of the new area that has yet to be bid out, consigning foreign companies to the role of financial investors. That would limit their ability to help set the pace for the oil fields' development, while giving Petrobras significantly more power to generate jobs and award lucrative contracts.
The oil lies beneath about 20,000 feet of water, shifting sand, and a thick layer of salt. This so-called pre-salt region, stretching hundreds of miles, is the biggest oil reserve being developed in the world today, especially given the lack of headway in gaining access to Iraq's extensive deposits, said Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, an energy research consultancy. It is also expected to be among the most complicated sets of projects in the history of the oil industry. >>> Go to Full Story >>>
Energy Deal With Brazil Gives Boost to Paraguay
By ALEXEI BARRIONUEVO | The New York Times
Brazil has agreed to triple its payments to Paraguay for energy from a massive hydro-electric dam on their border, ending a long-running dispute.
For decades Paraguayans have protested the raw deal they got when their dictatorship-era government decided to build the world's largest hydroelectric power plant with Brazil along their shared border. While Brazil used the Itaipú dam to help develop its cities and industries, Paraguay was forced to sell its excess capacity to Brazil at preferential rates. Fernando Lugo, a former Roman Catholic bishop who was elected president of Paraguay last year, vowed to change that, making a renegotiation of Itaipú one of his chief campaign pledges.
Brazil's president, Luiz Inácio Lula da Silva, agreed to triple Paraguay's income from Itaipú, and to allow Paraguay to sell its power to Brazil at market rates. The agreement is a huge deal for Paraguay, one of South America's poorest countries. And it is a much-needed boost for Mr. Lugo, who has struggled with declining support in Congress and accusations that he fathered several children when he was a priest. For Brazil, the approximately $240 million a year it agreed to give up is a small price to pay for Mr. da Silva's broader goals of calming tensions with its neighbors, asserting Brazil's leadership in the region and promoting regional integration. "Brazil is not interested in growing and developing if its partners don't grow and don't develop," Mr. da Silva said in a speech here.
Brazil had long rejected the possibility of renegotiating the original arrangements for selling electricity from Itaipú. But with Honduras in chaos and President Hugo Chávez of Venezuela continuing to spread his political influence, Mr. da Silva was seeking to manage Brazil’s desire to expand its economy while reining in the nationalist demands of its neighbors, political and risk analysts said. "The whole hemisphere is in play," said Riordan Roett, chairman of the Latin American studies program at Johns Hopkins University. "The Brazilians are going to do anything they can to shore up the moderate or democratic left in Latin America. They are quite clearly hoping that Lugo will move in the direction of staying with the Brazilians." >>> Go to Full Story >>>
