By Luiz Bulcao (via Veja).

Discovered in 2007, Petrobras’ pre-salt oil reserves were taken as the miracle required to launch Brazil towards a developed country status. But the rewards of this “Godsend,” as then-president Lula called it at the time, were not yet reaped. With the auctions for the fields exploration completely frozen until the Brazilian Congress agrees on how the royalties will be shared, the pre-salt is a reality only in the few Petrobras fields already in operation. The delay of these definitions is another complicating factor in this complex operation in the distant and deep ocean.

The project slowness also makes it difficult to predict exactly what are the true benefits that the country may reap with the pre-salt reserves. The technological complexity and high costs of production would make the barrel price competitive only in a scenario of high oil prices. However, the other larger issue is the prospect that when Brazil has figured out its challenges on becoming a major oil exporter, the global demand for the world’s most coveted fuel in the last century may not be the same anymore. And the change becomes easier to envision as one looks at the United States – the largest consumer and importer of oil on the planet – which is experiencing an energy revolution by improving the techniques for the production of oil and gas from unconventional sources by hydrocarbon fraction.

Adam Sieminski, chief of the Energy Information Administration (EIA), an American agency, says that several factors contribute to a radical change in the geopolitical scenario. One is the stabilization of energy demand by the developed countries. He said that the real growth in demand will take place in non-OECD countries, such as India and China. The traditional consumers, like the U.S., Europe and Japan have a stabilized demand. The United States, for example, had a significant increase in energy efficiency, since over the last few years the industry has innovated and developed technologies that use less fuel. The other factor that relieves the pressure on American energy is precisely the alternative sources of energy, the unconventional fuel.

Sieminiski points to two rock formations in the U.S: Bakken, in the state of North Dakota and Eagle Ford in Texas. “Do not be embarrassed of not knowing where is North Dakota. Many Americans do not know either. They think it is somewhere near Canada. And they are right. Except that this place will soon reach the second position in the US production chain of oil and gas,” he said. In 2005, 60% of U.S. oil came from imports. The percentage dropped to 49% in 2010, and EIA estimates the number to drop further in 2035 to the range of 14% – 36%. In such a scenario, the US estimates that its oil demand in 23 years from now would be completely supplied by Canada and Mexico. This phenomenon is considered by experts as the self-sufficiency of North America. “I believe that the United States may even become net exporters of oil. This would be very interesting, because we have a federal law that does not allow export, precisely because we are very dependent,” said Sieminski. “The opportunity for Brazil, if the country can increase its production, may end up being to aim at other markets,” he said.

Sharing the table with Sieminiski at Rio Oil & Gas was Helder Queiroz, director of Brazil’s National Petroleum Agency (ANP), who seemed more optimistic about the prospects of the pre-salt reserves. According to him, Brazil will be able to produce 4.5 million barrels of oil a day by 2020 – which would allow exports to range from 1.5 to 2 million barrels of oil a day.

Giovani Machado, head of Empresa de Pesquisa Energetica (EPE), notes that the stabilization in oil imports by developed countries implies a completely different scenario for Brazil’s role as exporter. “Not only does Brazil have to put the oil surplus in a farther market but it will have to get there at a very competitive barrel price, while producers in other countries are losing market share. This makes it twice as difficult to remain competitive in such a challenging scenario,” he said.

Helder Queiroz said he did not believe that Brazil would be running high risks to produce the pre-salt in a scenario of low oil prices. “The end of cheap oil is based on the fact that the best reserves have already been discovered. It is increasingly difficult to find “low cost” reserves,” he said. However, Queiroz admits that there would be problems if the barrel price stays below $50. “There is no such thing as zero risk in the oil industry. In the end of the day, the pre-salt is far along from the coast at the depth of 7,000 meters,” he said.

Source: Veja

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5 Responses to US energy revolution may get in the way of Petrobras’ plans for the pre-salt oil reserves

  1. Thomas says:

    Rubbish high oil prices are here to stay , we will never go back again to cheap oil.Fracking causes a lot of pollution and is not a proven process.

  2. Many shale gas and oil projects in the US were possible thanks to a high oil price, with the shale boom in the US now, prices will eventually go down, making it harder for other shale oil projects in the world to take off.

    Risk diversification and future markets makes it possible for US operators, but Petrobras and other state owned oil enterprises cannot do the same thing.

  3. tom jones says:

    steve from virginia says:
    September 22, 2012 at 7:42 pm

    “And the change becomes easier to envision as one looks at the United States – the largest consumer and importer of oil on the planet – which is experiencing an energy revolution by improving the techniques for the production of oil and gas from unconventional sources by hydrocarbon fraction.”

    The increase in production amounts to a few hundred-thousand barrels per day … out of consumption of + 18 million barrels per day, 2/3ds of which are imported.

    The decline in US energy consumption is due to deleveraging/decline in credit in the US, increased unemployment and poverty. 50 million in the US are on food stamps: those who can afford fuel cannot afford a car. Cars are sold because manufacturers’ lenders offer interest-free ‘sub-prime’ loans.

    For anyone who believes the US will become a net exporter of ‘oil’ in the near future, I have a bridge you might like to take a look at. …..”

  4. gringo nao sabe nada says:

    Yup….all projections show oil as the major energy source through at least 2030. Now if the Brazilians can get the presal flowing in another 10 years is a good question. By then Brazil will probably need 2.5 to 3 million barrels a day and will have less for export. In the end, a good thing possibly as it may save the country from the “curse of oil.”

    A side note is Mexico becoming more industrially diversified as its oil dependency goes down. Brazil becoming more dependent on commodities as its industrial base stagnates.

  5. Mutt Bee says:

    If we need to be independent, we must change our ways such as: 1) work from home 2) require solar panels for building new homes 3) remove Hoa barriers (most home owner associations does not allow it) and 4) subsidise alternative energy for current homes 5) increase min bldg energy requirement for saving at home 6) subsidise electric gas stations and electric home connections
    Tax subsidy can be: 1) shave 50% off your income tax 2) tax less alternative energy business such as first year tax is 25% off
    - that will boost the economy because everyone will immediately be in the business

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