Brazil on the PBS Newshour, 1 July 2010

Here is a report on the PBS Newshour, which I discussed a little last week. I stirred some controversy by stating that I thought it was more objective. Perhaps it is not more objective due to government funding, but maybe due to the editorial policies of the principals, including Jim Lehrer, though he is coming to the end of his career. The point of this story is to compare Brazilian risk control in oil spills with those of BP, given the recent oil spill in the Gulf of Mexico. Brazil may get some short term, small incremental advantage by being safe in comparison to the big spill in the Gulf of Mexico.

Link to story, including video. (I will try to post the youtube link when it becomes available)

JEFFREY BROWN: Next: The booming South American nation of Brazil is looking to oil to give it an even bigger boost.

Margaret Warner reports from Rio de Janeiro.

MARGARET WARNER: The P-51 oil platform rises from the South Atlantic off the Brazilian coast like a fire-breathing leviathan of mythic times. As the U.S. fights to pacify the BP gusher in the Gulf, the P-51, owned by Brazil’s national oil company, Petrobras, is pumping 24/7 from similar depths below the sea.

It’s the latest in Brazil’s quarter-century push to develop its oil reserves. Ninety percent are offshore, many in far deeper waters than the BP rig.

Julio Almeida is operations chief of a vast Petrobras field, with three rigs at work. He’s proudest of this one.

MAN: This platform was the last platform built by Petrobras, and here you have the last technology installed here.

MARGARET WARNER: It draws from 19 wells to produce 135,000 barrels of oil a day and 1.6 million cubic feet of natural gas. Platforms like this have spawned a huge oil service industry.

The economy of once-sleepy Macae 100 miles back onshore has grown six-fold in a dozen years. Brazil gets a remarkable 45 percent of its energy from renewable sources, but its oil production soared after discovering deepwater fields in the mid-1980s.

Petrobras now produces one-quarter of all the deepwater oil on the planet, and the country no longer has to import foreign oil. Now Brazil is embarking on new ultra-ultra deep fields some 200 miles offshore, buried under nearly five miles of water, semi-hard salt and rock. The venture has been dubbed the pre-salt. But now the BP spill prompts some to say caution is in order.

SEGEN ESTEFEN, professor, Federal University of Rio de Janeiro: This new accident, it’s an alert. It’s a kind of yellow light that we should take care and we should be very careful about the next step.

MARGARET WARNER: Segen Estefen, professor at the Federal University of Rio de Janeiro, oversees a research center testing new equipment for industry clients, including Petrobras, to see if it can withstand pressures it will encounter at sea.

SEGEN ESTEFEN: It’s a typical scenario for deepwater exploration and production.

MARGARET WARNER: But that is much greater than back even at the BP Horizon level.

SEGEN ESTEFEN: Sure, because, you know, the control of the equipment here, it’s more complicated.

MARGARET WARNER: His testing devices include a chamber pressurizing water to ever greater depths and a wave machine roiling water in a deep tank to see if small rig prototypes can take the pounding.

Estefen says most oil companies he knows were shocked at BP’s repeated failures to cap its damaged well.

SEGEN ESTEFEN: And this was a big surprise, because the state-of-the-art contingency plans didn’t work in very deep waters.

MARGARET WARNER: The shock jolted some governments, including Norway and the U.S., to curtail licensing or drilling. Brazil has done none of that.

MAGDA CHAMBRIARD, director of operations, ANP: Every human activity has risk. When we cross the street, we face risk. What we do is to reduce risk to a minimal level.

MARGARET WARNER: Magda Chambriard, operations director at Brazil’s national petroleum regulatory agency, the ANP, says it has asked companies to reassess their risk to a BP-like event, but won’t impose new rules until the U.S. completes its probe of the disaster.

MAGDA CHAMBRIARD: We are confident in what we are doing in Brazil by now, but we are open to analyze the answer of this — this investigation, and, if necessary, we can adjust our standards.

MARGARET WARNER: Along Brazil’s spectacular coastline, there’s lot at stake in the ANP getting it right.

This is the scene on a Sunday morning all up and down the miles-long shoreline of Rio, the entire city, it seems, rich and poor and in between, out enjoying the sun, the air and each other. This is what would be threatened by a BP-style oil spill.

At this Copacabana fishing cooperative 120 miles south of the P-51 rig, Brazil’s waters provide livelihood of a decidedly low-tech sort. Fifty-five-year-old Carlos Figueiredo, who supports his family by fishing, says he’s never had to face an oil spill and isn’t worried now.

CARLOS FIGUEIREDO, fisherman (through translator): I’m not really afraid because all the fish are in deep, deep water, and the oil stays on the surface.

MARGARET WARNER: But sun worshipers Sonia Nascimento and Fabiana Adelino would hate to lose their precious beach escape.

WOMAN (through translator): Yes, I’m afraid, it’s terrible. It’s not impossible. It can happen.

MARGARET WARNER: And they worry their government isn’t taking the BP spill seriously.

FABIANA ADELINO, beachgoer (through translator): They’re not truly committed. I think the will is missing to do things to make us safe.

MARGARET WARNER: Successful surf shop owner Carlos Tavares also worries about a BP-like spill. Yet, he believes Petrobras can handle whatever happens.

CARLOS TAVARES, surf shop owner: If I don’t believe in them, in the company Petrobras, how you — who I can believe — who I can believe?

MARGARET WARNER: Then there’s the environmental risk. Ecological economist Peter May brought us to pristine Prainha Beach, way south of Rio. The oil rigs are directly offshore, but farther than the eye can see.

PETER MAY, ecological economist, Federal Rural University of Rio de Janeiro: There is no such thing as a safe oil drilling operation offshore, no matter how deep or shallow. As we have seen in the Gulf, the worst can happen, and the result can be devastating.

MARGARET WARNER: May wants the new pre-salt reserves left underground while Brazil keeps expanding its renewable energy options.

PETER MAY: In the economy, we have potential to take a different route, and we’re missing that opportunity.

MARGARET WARNER: Do you think there’s any chance that Brazil won’t go ahead and develop this huge new reserve?

PETER MAY: Very little. And I think this is pretty much a fait accompli.

MARGARET WARNER: There seems to be quite a lot of confidence in Petrobras and in the government.

PETER MAY: Certainly. Confidence is kind of Brazil’s middle name, optimism and confidence for the future and Brazil, the country of the future.

MARGARET WARNER: That future certainly looks bright. Brazilians are riding an economic wave of high growth and low unemployment that’s the envy of the U.S.

Back on the P-51 platform, that confidence is palpable, especially when it comes to the safety.

MAN: Then years ago, Petrobras used other type of platform. They are much more stable than the older ones.

MARGARET WARNER: The technology on this new platform is impressive, but it doesn’t answer the fundamental question. Since the new pre-salt fields will be pumping at two to four times this depth, in rougher waters more than twice as far out to sea, is the current technology enough to ensure safety in the rigs to come?

No, says former ANP director David Zylbersztajn. The ability to drill deep has outpaced the know-how of how to do it safely.

Does the technology exist anywhere on the globe to do the kind of ultra-ultra deep drilling that this new project will require?

DAVID ZYLBERSZTAJN, former director, ANP: No. No. This technology — exactly this technology no. With the salt layer between the sea and the rock, those conditions are more complicated in terms of how to — to face with a — an accident.

MARGARET WARNER: The ANP’s Chambriard concedes the point, but says Brazil overcame a similar lack of expertise after the mid-’80s deepwater discovery.

MAGDA CHAMBRIARD: For sure, we will increase technology. We will improve materials. We will have lots of new technologies arriving to ensure that we will have these operations as safe as possible.

MARGARET WARNER: So, you have great confidence in meeting this challenge?

MAGDA CHAMBRIARD: Sure. Brazilians are accustomed to do this, because — not because Brazil wants to do this, but because Brazil needs to do this.

MARGARET WARNER: Former ANP head Zylbersztajn faults the country’s political leaders for not questioning that confidence.

DAVID ZYLBERSZTAJN: For our congressmen, they are not so much interested in terms of what exactly is the government proposing. But they are discussing about how to share the money.

MARGARET WARNER: So, everyone can see that pot of black gold out there?


MARGARET WARNER: Urban scholar and historian Rosa Maria Araujo says that’s why there’s been no political or public outcry for a rethinking of the pre-salt venture.

ROSA MARIA ARAUJO, historian: Well, the oil has a capital importance for Rio, for the state of Rio.

MARGARET WARNER: In addition to boosting the skyline of Rio, oil money has helped funded a social experiment in some of the favelas, or slums, with stipends, jobs, clinics and police protection to take back control from the drug gangs that used to terrorize them.

JOSE ADELINO, Brazil (through translator): Children don’t see the parade of people with guns walking around, and we don’t hear people fighting at night.

MARGARET WARNER: But Brazilians say much more needs to be done to close the gap between rich and poor.

ROSA MARIA ARAUJO: The health policy, the education policy, and the security policy, the security for — to try to face the crime, they are very expensive. You have to have long-run policies.

MARGARET WARNER: For that, says Araujo, oil riches are key. Could it be done without that?

ROSA MARIA ARAUJO: No, we could not. The revenue of Rio, without the oil revenue, is not enough.

MARGARET WARNER: In a country with Brazil’s dynamic economy and spirit, yet huge unmet needs, it’s a safe bet that, for the foreseeable future, Brazil’s ultra-deep wells will keep on pumping.

Published by Janar Wasito

Janar Wasito is the manager of Magis Capital in San Diego, CA. He is a graduate of Harvard and Stanford Law School, and a former Marine Officer.

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