Will Brazil's oil bonanza drown out renewables?

0n 9 November 2007, Brazilian authorities called a press conference and finally confirmed what most natives had long suspected: that God was Brazilian.

After years of deep water testing and drilling, the state oil giant Petrobras had announced the discovery of vast new reserves of light crude, located thousands of kilometres under the Atlantic Ocean, beneath a thick layer of salt. These reserves were so big that they would change the country forever, politicians said. So big, in fact, that Brazil’s President insinuated that divine intervention, as well as geology, must have played a part.

Immediately after the find was announced, President Lula da Silva’s Chief of Staff, Dilma Rousseff, claimed the find could elevate Brazil’s oil wealth “to the level of Saudi Arabia and Venezuela”, and help lift millions of Brazilians out of poverty. Carnival had arrived early.

Two years on, and the excitement is undiminished. Petrobras’s CEO, Jose Sergio Gabrielli, recently declared: “If we reach 5.7 million barrels per day, we will be producing more than half of all the other companies in the world put together”.

He’s not alone in dreaming big. “Conservatively, I’d say that we will become the eighth biggest [oil producer in the world],” says Mauricio Tolmasquim, President of Brazil’s state-owned Energy Research Corporation (EPE) and one of the main architects of national energy policy.

Yet amid the euphoria there are many voices of concern. Some fear that new legislation currently being debated in Congress, designed to ensure oil wealth is distributed fairly across the country, will stifle Brazil’s pre-salt exploration campaign by reducing the opportunities of foreign companies.

Others, though, are more alarmed by the environmental implications of the find. For Roberto Smeraldi, Founder-Director of Amigos da Terra – Amazônia Brasileira, the pre-salt drilling represents “a true carbon bomb, releasing four times the amount of greenhouse gas per unit than conventional drilling”. Along with new planned investment in coal power, he argues, “this would offset the gains that might be obtained by achieving zero deforestation”.

Sergio Leitao, a Director at Greenpeace Brazil, agrees. “It is estimated that the total emissions from the pre-salt reserves could reach 56 billion tonnes of CO2. This means that over the next 40 years Brazil will be emitting around 1.3 billion tonnes of CO2 annually through refining and burning oil. [This would] double its total emissions…making Brazil one of the top three CO2 emitters in the world.”

Then there is concern as to what this oil bonanza might mean for the country’s much vaunted renewables revolution. Recent years have seen Brazil held up as an international example, leading the way in the use of low carbon sources of energy – principally large-scale hydro and ethanol from sugar cane.

Brazil’s huge dams supply around 90% of the country’s electricity, not without controversy [see ‘Hydro worth a dam?’]. As a result, its power generation is largely fossil fuel-free – even though hydro’s wider impacts, in terms of drowned forests and displaced indigenous peoples, raise serious question marks over its sustainability.

It’s much the same story with transport fuel. Large-scale investment in the country’s ethanol programme on the part of the military regime of the 1980s laid the foundations for future development. Now, of all cars produced in Brazil, 90% are ‘flex fuel’ – designed to run on both ethanol and petrol. Investment in biofuels remains buoyant, and industry leaders are working alongside NGOs and Government in an effort to ensure that increasing demand for suitable cropland does not drive deforestation or limit food production [see ‘Sugar shack’].

Other sources of renewable energy have yet to play a major role. There’s a small, but growing, wind economy, with five new farms taking total capacity to 341MW. Solar photovoltaic (PV) installations are also beginning to tap Brazil’s 280 days of sunshine a year, bringing electricity to remote off-grid communities, particularly in the Amazon. But the potential far exceeds achievements to date. A 2009 industry analysis identified a $25 billion future renewable energy market, involving biomass, solar PV, solar thermal, hydro and wind.

It is possible, of course, that new-found oil wealth will unlock more funds for renewables. Petrobras is making much of its commitment to cleaner sources of energy, including biofuels.

But environmentalists are sceptical. Leitao argues that the Government’s focus on new legislation covering the pre-salt oil has already “taken attention away from attempts to draw up a new regulatory framework for renewable energy”. This, he fears, “will prevent Brazil from making a technological jump in its energy matrix by investing in clean and renewable sources, which [could] revolutionise the patterns of consumption and production around the world”.

Tolmasquim disagrees. “Brazil will continue with a high level of renewable fuels... In terms of transport, ethanol will still play a key role in the market,” he insists, pointing out that 75% of flex fuel car owners choose to use ethanol. But he admits that, when it comes to global demand, ethanol is “not a substitute” for oil.

Gabrielli of Petrobras also envisions “no significant shift” in global energy consumption patterns over the next 30 years. “Coal, oil and gas” will be used in the same proportion, he predicts, adding: “Any change will be long term. But this doesn’t mean there will not be more sustainable energy, more biofuels”. “Oil will be fundamental to humanity for a long time,” agrees Brazil’s Minister for Energy and Mining, Edson Lobao.

And it is this reluctance to envisage a world without oil that some see as holding Brazil back. “Just as the Stone Age didn’t come to an end because of a stone shortage, the oil age won’t end because of a lack of oil, but as a result of the technological race to substitute it,” comments Leitao.

By putting all of its energy eggs in one basket, Brazil could fall behind other countries in research, investment and infrastructure for sustainable energy. And that would not be good news for Brazilians – even with God on their side.

Tom Philips is a British journalist and documentary maker who lives in Rio. He writes for The Guardian.

2 March 2010

Tom Phillips