Ethanol Policy and Oil Exploration Make Brazil Oil Self Sufficient

Once almost completely dependent on oil imports, early next year, Brazil will begin producing as much oil as it consumes, and shortly thereafter it’ll join the ranks of the world’s net oil exporters.

The accomplishments are due to a years-long push to find oil within Brazil’s borders and to decades of government efforts to keep oil consumption low by encouraging the use of alternatives such as ethanol from sugar cane and soy.

"Brazil has a lot to be proud of when you talk about petroleum policy, especially when you look at other Latin American countries," said Roger Tissot, an analyst with the U.S. based consulting firm PFC Energy.

Brazil with a 186 million population consumes about 1.8 million barrels of oil a day, while the U.S. consumes more than 10 times as much, 58% of it imported, according to the U.S. Energy Department.

However the search for alternative sources and Brazil’s willingness to look for new sources of oil are lessons in how public policy can confront dependence on foreign energy.

"Brazil has taken effective steps to protect itself from international price volatility," said Sophie Aldebert, a Rio de Janeiro-based associate director with the consulting firm Cambridge Energy Research Associates.

But the energy turnaround is astonishing for a country that in the 1980s imported 40% of its energy needs and whose fragile economy repeatedly has felt the inflationary pressure of soaring energy prices.

Brazil’s emergence as an energy player began 40 years ago when state planners launched oil exploration off its southern coast. The move was daring since Brazil wasn’t among the world’s technology leaders at the time, and the deposits presented enormous technological challenges, said José Luiz Marcusso, Petrobras’ general manager of domestic exploration and production strategy.

Brazil pioneered deep-water exploration methods using state-of-the-art pipelines, buoys and other equipment that extended the depths in which oil could be reached. Today, it extracts four-fifths of its oil from under the ocean floor of the Campos Basin field near the coasts of Rio de Janeiro and Espí­rito Santo states.

Another major factor has been the rise of alternative fuels. Half of all the new cars sold in Brazil are so-called "flex-fuel" models that can run on ethanol as well as gasoline.

Ethanol makes up about a third of the fuel that’s pumped into cars in Brazil, compared with 2% in the United States. Besides, Brazilian law requires gasoline to contain at least 25% ethanol.

Ethanol has one major drawback: It produces 20% fewer miles per gallon than gasoline. But Brazilians also pay 40% less for ethanol, an average of US$ 2.54 per gallon versus US$ 4.21 per gallon of gasoline, a difference that makes up for the lower fuel efficiency.

Consumption of ethanol has grown nearly 10% from 2000 to 2004, while production zoomed 40%.

Mercopress – www.mercopress.com

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