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Brazil - Energy

Brazil is the ninth largest energy consumer in the world and the third largest in the Western Hemisphere, behind the United States and Canada. Total primary energy consumption in Brazil has increased by close to a third in the last decade, due to sustained economic growth. In addition, Brazil has made great strides in increasing its total energy production, particularly oil and ethanol. Increasing domestic oil production has been a long-term goal of the Brazilian government, and recent discoveries of large offshore, pre-salt oil deposits could transform Brazil into one of the largest oil producers in the world.

The Government of Brazil undertook an ambitious program to reduce dependence on imported oil. In the mid-1980s, imports accounted for more than 70% of Brazil's oil and derivatives needs; the net figure is now zero. According to the Oil and Gas Journal (OGJ), Brazil has 12.9 billion barrels of proven oil reserves in 2011, the second-largest in South America after Venezuela. The offshore Campos and Santos Basins, located off of the country's southeast coast, hold the vast majority of Brazil's proven reserves. In 2010, Brazil produced 2.7 million barrels per day (bbl/d) of liquids, of which 75 percent was crude oil. Brazil's oil production has risen steadily in recent years, with the country's oil production in 2010 about 150,000 bbl/d (6 percent) higher than in 2009.

Most Brazilian oil is produced in the southeastern region of the country in Rio de Janeiro and Esprito Santo states. More than 90 percent Brazil's oil production is offshore in very deep water and consists of mostly heavy grades. Five fields in the Campos Basin (Marlim, Marlim Sul, Marlim Leste, Roncador, and Barracuda) account for more than half of Brazil's crude oil production. These Petrobras-operated fields each produce between 100,000 and 400,000 bbl/d. International oil companies also play a role in Brazilian production. The Shell-operated Parque de Conchas project and the Chevron-operated Frade project are expected to achieve production levels of 100,000 bbl/d and 68,000 bbl/d, respectively.

A consortium of Petrobras, BG Group, and Petrogal discovered the Tupi field in 2007, which contains substantial reserves that occur in a pre-salt zone 18,000 feet below the ocean surface under a thick layer of salt. Following Tupi, numerous additional pre-salt finds were announced in the Santos Basin, such as Iracema, Carioca, Iara, Libra, Franco and Guara. Additional pre-salt discoveries were also announced in the Campos and Espirito Santo Basins. Brazil announced in early 2008 the discovery of the massive offshore ("pre-salt") Tupi and Carioca oil fields off the coast of Rio de Janeiro. Estimates for the total pre-salt resources vary. Some analysts place total extent of pre-salt recoverable oil and natural gas reserves at more than 50 billion barrels of oil equivalent. The oil reserves in these fields are conservatively estimated at between 30 billion and 80 billion barrels of oil equivalent, which would put Brazil in the top 10 countries in the world in reserves. Output from the existing Campos Basin and the discovery of the new fields could make Brazil a significant oil exporter by 2015. The depth of the area will make recovery challenging and expensive. The eventual exploitation and investment in the attendant infrastructure could provide rich opportunities for U.S. companies but proposed legislation by the GoB to regulate the area has brought the extent of that potential into doubt. In December, 2010 Petrobras submitted a declaration of commerciality to the ANP for the Tupi and Iracema fields, which renamed the fields Lula and Cernambi, respectively. The total recoverable reserve estimate for these fields is 8.3 billon barrels of oil equivalent (boe) (6.5 billion boe for Tupi and 1.8 billion for Iracema).

Brazil's pre-salt announcements immediately transformed the nature and focus of Brazil's oil sector, and the potential impact of the discoveries upon world oil markets is vast. However, considerable challenges must still be overcome in order to bring these reserves to fruition. The difficulty of accessing reserves, considering both the large depths and pressures involved with pre-salt oil production, represent technical hurdles that must be overcome. Further, the scale of the proposed expansion in production will also stretch Petrobras' exploration and production resources and Brazil's infrastructure.

Brazil is one of the world's leading producers of hydroelectric power. Of its total installed electricity-generation capacity of 112,000 megawatts, hydropower accounts for 77,000 megawatts (69%). Many of Brazil's hydropower generating facilities are located far away from the main demand centers, resulting in high transmission and distribution losses. Brazil's largest hydroelectric generation asset is the Itaipu facility on the Parana River, which Brazil maintains with Paraguay. According to Itaipu Binacional, the facility generated 94.7 Bkwh of electricity in 2008. Although Brazilian planners aspire to diversify away from hydropower to mitigate supply shortage risks brought about by dry weather, new hydro projects continue to move forward.

Brazil is the worlds largest biofuels exporter and sugar-based ethanol makes up over 50% of its vehicle fuel usage. Brazil and the United States, as the worlds largest biofuels producers, are working jointly through a 2007 memorandum of understanding to help make sustainable biofuels a global commodity. The USG and the GoB built a close and productive energy relationship through the 2007 Biofuels Memorandum of Understanding in which it was agreed to work together to promote biofuels as a global commodity, research and development in next generation biofuels, and development of biofuels capacities in third countries. Building on the success of this initiative, the United States and Brazil have explored other avenues for cooperation, such as a possible Binational Commission on Energy.



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