Brazil oil industry still profitable, minister says

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By Javier Nieto-Remolina

MADRID — Brazil’s energy and mines minister said here that the scale of his country’s current oil production and its expected future output are large enough to make the industry profitable even at current prices.

Edison Lobao, on a trip to learn about Spain’s wind energy model, told Efe in an interview here that at any rate Brazil expects prices to stabilize toward the end of the year at between $60 and $70 per barrel, compared with a price of $52 per barrel for both European and U.S. benchmark crude on Thursday.

“It’s easy for OPEC to raise the price of oil; it’s just a matter of reducing production and the price will rise, there’s not much mystery to it,” said Lobao, who stressed that “the current price still is competitive.”

He added that “when (the price) falls too much, OPEC will reduce production and the price will go up, just as when the price was at $150 (last summer) OPEC understood it had to lower it and increased production.”

According to Lobao, enormous reserves of light crude discovered by state oil firm Petrobras over the past 18 months in a giant Brazilian offshore oil region known as the “pre-salt” (under a thick layer of salt far beneath the ocean floor) will enable the country to “produce large amounts of oil in the short term.”

“These are some reserves that practically double (current proven reserves of 14 billion barrels), as well as others in the same region,” said Lobao, who added that the Brazilian government for this reason is designing a new “regulatory framework” for the development of that stock of petroleum “that will be used to meet domestic consumption and for future exports.”

That new framework also will ensure that royalties and other profits from oil production are distributed “among all Brazilians” in the form of large-scale investment in the education, health and housing sectors, he said.

The minister emphasized the fact that Brazil “has not succumbed to the (global financial) crisis but, on the contrary, has stepped up its investments…; if the crisis began in the real estate sector, in Brazil we’ve fought it by building much more.”

He cited as an example a program to build more than a million units of low-cost housing in two years.

With respect to the crisis, the minister also said the Brazilian energy sector has big long-term plans and does not intend to “stop spending a single dime, but on the contrary to accelerate investment.”

Petrobras announced recently that it is pushing ahead with an aggressive $174 billion, five-year investment plan through 2013, up 55 percent over the previous five-year plan ending in 2012.

“That’s been Brazil’s response in all sectors of the country’s economy and we’re already seeing results,” including an increase in electricity consumption by industry and the “drastic” rise last month in auto sales, “like never before in our history,” Lobao said.

With regard to renewable energy, the minister said that “Brazil is looking to the future with the present as an example,” adding that his country has “the world’s cleanest energy matrix, with 48 percent clean and renewable energy, while the world average is 14 percent.”

Lobao acknowledged, however, that it is still expensive for Brazil to produce wind and solar power, “the energy of the future.”

In that respect, the minister said Brazil has “a lot to learn from Spain” in terms of wind energy and that the two countries plan to join forces “for the benefit not only of the two countries but of all humanity.”

Lobao plans to travel Friday to Toledo to visit Iberdrola’s Renewable Energies Operations Center, a high-security facility where the giant utility remotely monitors its worldwide renewable energy assets.

EFE

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