Brazil explores pre-salt oil extraction

Brazil explores pre-salt oil extraction

Energy independence has moved up on many country’s agenda recently, and Brazil is no exception. Brazil is looking beyond the coastline to its underwater oil reserves and preparing for pre-salt oil extraction.

Pre-salt refers to oil reservoirs found below a 1-2 kilometer-thick layer of salt and rock off the coast of Brazil filled with light hydrocarbons. Brazil has developed the proprietary technology that blasts through the layer and releases the hydrocarbons for extraction. Petrobras, Brazil’s state-owned oil company, has announced it is ready to drill: it plans to begin the first phase of pre-salt extraction later this year, initially yielding 1 million barrels per day.

Pre-salt oil reserves in Brazil

Petrobras, Brazil’s state-owned oil company, is ready to drill: first phase of pre-salt extraction later this year, initially yielding 1 million barrels per day. (Photo credit:

Petrobras estimates there are 5 to 8 billion barrels of oil in the Lula field alone (that’s enough to satisfy U.S. consumption for a year), and, with pre-salt drilling predicts a 70% increase in national oil production capabilities in the next 10 years, enough to bump Brazil up a few places in the global oil reserve standings.

But as with hydraulic fracturing (commonly known as fracking) in the U.S. and U.K., pre-salt drilling is not without risks. Reaching the oil is a challenge in itself and Petrobras needs to ensure the salt layer is stable enough for drilling and then extraction. Environmentalists have also pointed out it is still unclear what long term effects the disturbed rock and released hydrocarbons can have on the underwater ecosystem.

As complex as offshore oil extraction is, the politics are even murkier. Petrobras holds a unique position in Brazil’s energy sector: it is 40 percent state-owned, and all new private pre-salt energy ventures are required to grant Petrobras a minimum 30 percent stake of all pre-salt oil rights sold. While environmentalists and other international stakeholders have successfully lobbied Brazil’s government on some environmental measures such as reducing Amazon deforestation, there was no government conflict of interest as there is with Petrobras.

Environmental concerns aside, 2014 is an election year and President Dilma Rousseff is looking to add energy independence, economic growth and poverty reduction to her list of policy accomplishments. Rousseff announced a proposal to earmark oil royalties for education, the second time in two years, but whether Congress approves it remains to be seen. Just last week the Trade Ministry announced Brazil had experienced its largest trade deficit since 1959 during the month of April, which could lead Congress to table the education proposal and prioritize balancing the trade accounts instead.

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