Despite new oil discoveries offshore, a booming biofuel industry and massive hydropower production, Brazil is still struggling to meet the energy demands of its surging economy.
 | Oil BoomThe new Petrobras oil platform P-52 at Campos basin near Rio de Janeiro. New oil discoveries further off-shore could render Brazil independent from oil imports (Photo: Reuters) |
High commodity prices, a curse for many countries, have been a blessing for Brazil. With significant domestic reserves in oil and natural gas, a thriving biofuel industry, and an abundance of hydropower, the country has become a model for near energy independence.
It wasn’t always like this. At the time of the first oil crisis in the 1970s, almost 80 percent of Brazil's total oil consumption was imported, and the increases in oil prices imposed a substantial burden on the country's economy. Since then, Brazil has tried to become independent from expensive oil imports.
Subsidizing a nascent biofuel industry formed one part of this push for energy independence. Despite initial problems, ethanol, a biofuel made from sugar cane, supplied 20 percent of the all fuel consumed by automobiles, trucks, and other diesel-powered vehicles in 2006, according to the U.S. Energy Information Administration.
Deep sea dreams
While these figures are higher than in most other countries, Brazil still depends heavily on fossil fuels. To cut back on oil imports, massive investments have gone into Brazil’s domestic oil and gas industry. According to the National Center for Policy Analysis, Brazil has managed to increased domestic crude oil production by more than 9 percent a year from 1980 to 2005, to 1.6 million barrels of oil per day.
In 2007, Brazil stepped up its drive to find new oil, and announced a huge discovery off its coast that could increase its proven reserves by between five and eight billion barrels. Exploiting these ultra-deep water resources will be “a real technological challenge,” says energy expert Robert Hirsch, who expects oil production to begin in about five to ten years.
 | Harvesting EnergyA truck is loaded with sugar cane northeast of Sao Paulo. Brazil is a pioneer in the use of ethanol made from sugar cane to power cars (Photo: Reuters) |
Recent unconfirmed reports also mention new discoveries hundreds of miles offshorecoast which may hold over 30 billion barrels, which would make it one of the largest oil discoveries ever.
Volatile gas imports
Natural gas can also be found in Brazil, but demand far exceeds domestic production. In May 1992, Brazil and Bolivia signed an agreement on a 2,270-kilometer, 2-billion-dollar pipeline system to import natural gas from Bolivia.
The first deliveries started in 1999. Bolivia now exports two-thirds of its production to Brazil, covering about half the nation’s consumption. But as the Southern Hemisphere prepares for the onset of winter, natural gas production in Bolivia is lagging behind the initial targets.
Observers blame Bolivia’s nationalization of oil and gas fields in 2006, which stripped the Brazilian oil and gas giant Petrobras of two gas refineries and brought foreign investment to a halt. Without this investment, development of Bolivia’s gas industry has stalled. The reality for Brazil and Argentina, however, is that getting gas from elsewhere would be difficult and costly.
"Do you want to shut down Sao Paulo? We don't want that either, so we need gas from Bolivia. There's no other way. We can't run away," Petrobras President Jose Sergio Gabrielli recently told the Folha de Sao Paulo newspaper defending new investments. According to Gabrielli, Brazil will remain dependent on Bolivian natural gas until at least 2019.
Living with the water – and without it
Another reason why natural gas is so important for Brazil is the countries dependence on hydro power, which fluctuates with the seasons. Gas fired power plants could make up for these irregularities.
Itaipu, the world’s second-largest hydro power plant, produces 14 Gigawatts of energy, ten times as much as an average nuclear power plant. The dam supplies more than two-thirds of the energy consumed by Paraguay and 20 percent of that consumed by Brazil.
Dams produce most of the electricity consumed in Brazil, but when water levels drop during the dry season, electricity output declines. In 2001, growing demand for electricity coupled with an unusually dry summer reduced reservoirs to a critical level. The ensuing shortage of electricity lasted from July until December 2001.
Many of Brazil's hydropower plants are also located far away from major population centers. An estimated 16 percent of all electricity generated is lost during transmission and distribution. Improving Brazil's power grid, one of the largest worldwide, will be extremely costly.
Read more:
Energy Security in Europe: From Russia with Love
Energy Security in China: Catching up with Growth
Energy Security in India: Suffering from Success
Energy Security in the USA: A Declaration of Dependence
editor: Thilo Kunzemann
publishing date: May 27, 2008
