Underneath vast salt structures off Brazil lies a $2.3 trillion lake of oil.
The oil basins in deep ocean waters east of Rio de Janeiro are so porous and prolific that wells there pump nearly three times as much crude as the best ones in the Gulf of Mexico. These so-called pre-salt reservoirs, discovered in 2006, can turn a profit at $35 a barrel, rivaling even the most lucrative oil fields in the U.S. and the Middle East.
But with Brazil’s state-owned oil company, Petrobras, still reeling from a financial crisis, those largely untapped resources could get stranded under the salt unless the South American country can woo international oil companies in the wake of a widespread corruption scandals, a two-year economic depression, and a multitude of regulatory and bureaucratic barriers.
Brazil was a major presence at the Offshore Technology Conference in Houston last week, as was Mexico, with both selling themselves as the next big thing in deep-water drilling, both seeking massive foreign investment to tap their resources, and both promising to change the heavy-handed political control of their nationalized oil and gas industries. If they follow through on promises, oil prices rise and offshore activity makes a comeback, the two largest Latin American countries could rank among the most attractive regions in the world for deep-water drilling and provide huge opportunities for Houston’s assortment of offshore oil companies.
But it will be years before oil companies can start developing major deep-water projects off Brazil and Mexico, and some worry the machinations of deeply bureaucratic governments will stall the efforts for far too long. In Brazil, major projects have been held up for years by regulators. French oil company Total and Britain’s BP, for example, won rights to drill offshore in 2013 but have yet to receive environmental licenses that would allow them to begin drilling. If developments are delayed long enough, the global market’s rapidly changing mix of energy sources could eventually outpace its appetite for fossil fuels and the massive oil projects in those countries.
“Wind and solar energies are coming very quickly, and very competitively,” said Milton Costa Filho, secretary-general at the Brazilian Institute for Oil, Gas and Biofuels. “We need to produce the oil or it’s going to stay there for many centuries.”
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