By Doug Gray, Contributing Reporter
RIO DE JANEIRO – Petrobras’ share price was back up to its year-to-date high of 45 points on the New York Stock Exchange as news of a US$2 Billion loan to Brazil to help facilitate offshore exploration and drilling spread last week.
The US Export-Import Bank has made the funds available, but it comes at a time when President Obama’s opposition to the reintroduction of drilling in much of the US has proven hugely unpopular.
Critics have been quick to scorn the massive loan, claiming the loss of thousands of jobs that would have been provided within the US by rejuvenating the drilling industry there and developing Alaskan reserves, instead of boosting those of a foreign country and growing economic powerhouse.
Looking beyond the headlines, however, it would appear that securing influence in the massive potential of Brazil’s off-shore oil fields is exactly the kind of move the Obama administration ought to be making to secure the country’s future energy resources.
The very real possibility of fuel crises capable of sparking territorial conflicts in coming decades is one of the key driving forces behind the US as its own reserves (Alaska notwithstanding) are depleting by the day. The addition of Russian belligerence and the Middle East ruling out two of the world’s largest sources of oil creates even more of a climate ripe for international oil cooperation.
Exploration of the pre-salt layer in Brazil’s Tupi oilfield is predicted to reap huge rewards, with anything up to 100,000 barrels per day expected by 2010. Extracting the oil some 340 kilometers off the coast at depths greater than previously attempted will prove expensive though, and the US loan not only helps to realize the project for which 2010 funds were faltering, but also spreads the potential risk if the field’s size has been overestimated.
Two kilometers of water and a one kilometer-thick layer of rock have to be passed before the drill even makes contact with the layer of salt which itself reaches thicknesses of up to two kilometers. The kind of technology and expertise required to reach such depths does not come cheap.
As Fred Hochberg, Chairman of the Ex-Im Bank, wrote in a response to negative coverage by the Wall Street Journal, far from denying US citizens jobs in the domestic industry, the move guarantees US participation in the US$175 Billion investment plan Petrobras has recently announced for the next five-year phase of operations. This will not only guarantee a sizable sum of interest on the new loan, but also US jobs.
During his recent visit to Rio Hochberg he said, “I chose Brazil for a good reason: Brazil is a powerhouse among Latin American economies and offers tremendous opportunities for US exporters in many sectors. I want Brazilians to know that Ex-Im Bank has the will and the capacity to finance their purchases of US equipment, products and services.”
Amid growing opinion that oil prices are expected to reach $100 a barrel once more by the end of the year in line with growing industrial demand, a new deal has been slated between Brazil and China to guarantee oil exports to the extremely lucrative Far East market. If the reserves are as predicted and production gets anywhere close to 100,000 barrels per day, Petrobras’ massive investment plans will begin to pay off in spectacular fashion.