Cautioned by BP oil spill, Brazil continues deep-sea drilling

MEXICO CITY — Three years ago, the abundant "pre-salt" oil reserves found off Brazil's coast epitomized the country's optimism and rise on the world stage.

Now, the BP oil disaster in the Gulf of Mexico has cast a cloud of caution over finds that could translate into 50 billion barrels of crude equivalent.

It is not just conservationists suddenly urging more calm as oil gets drilled in ever deeper and remote corners of the globe. Only days after it began commercial production of pre-salt oil, Brazil has acknowledged that regulatory reviews and higher insurance costs could cause delays and dampen enthusiasm as the industry draws lessons from one of the worst environmental disasters of this generation.

"The days of easy oil are long gone," said Gianna Bern, president of Brookshire Advisory and Research in Flossmoor, Ill.

Still, the possible windfall is so big for Brazil that many observers say the Gulf spill is no deterrent.

"I do hear a lot of debate on how pre-salt moves forward, not on whether it should move forward or not," said Bern, who travels frequently to Brazil.

Brazil faces no small task ahead, embarking on one of the most technologically advanced drilling operations of modern times at untouched depths below more than 16,000 feet of sea, rock, and volatile salt deposits.

But Brazil has decades of expertise in deep-sea drilling, and state-controlled oil company Petrobras maintains that its plans to tap the oil found off its southern coast are well on track.

Brazil already adheres to some of the world's toughest regulations.

"There is a long safety track record that currently exists in Brazil," said Bern, pointing out that industry players have long been drilling in waters considerably deeper than the BP Gulf well.


Brazil has also learned from its own tragedies.

Augusto Rezende Antoun, an oil engineer who specializes in cleanup operations, said that Brazil's current legislation and expertise is a result of the Guanabara Bay spill in 2000, when a Petrobras pipe burst in the bay that borders Rio de Janeiro and flooded the waters with 400,000 gallons of crude.

The company was fined the maximum $29 million for that spill and fined similarly for another in the south of the country a few months later. The country was also shaken when a whole platform sank in 2001. Together, those disasters prompted legislation to demand better training and more oversight and led the company to invest close to $1 billion in safety and environmental planning.


Still, many say the BP oil spill will strengthen Brazil's safety regulations even more as it draws lessons in best practices and contingency plans.

"Brazil ... can learn a heck of a lot," says Jeremy Martin, director of the energy program at the Institute of the Americas in La Jolla, Calif. "They have had experts in the Gulf, observing what has been going on there."

Wagner Victor, the former secretary of oil and gas with the Rio de Janeiro state government, says changes will include more rigorous security systems and sophisticated equipment, more emphasis on training professionals, and higher insurance costs as companies demand more oversight. All of this will increase the cost of exploration.

"The BP accident will result in a series of modifications to international rules and regulations and that will have a knock-on effect in Brazilian legislation," said Mr. Victor.

Brazil's National Petroleum Agency (ANP), which, like Petrobras, sent a team to the Gulf to monitor BP's efforts, is reviewing its regulatory framework to decide if enhancements are needed. It has asked all companies drilling in Brazilian waters to inform them of the control systems in place and requested documentation to review their response systems.

But the Gulf spill has some urging Brazil reconsider deep-water plans.

In June, the Global Renewable Fuels Alliance (GRFA) issued a Top 10 list of offshore oil sites at risk today, and placed Brazil's pre-salt as No. 9.

But Brazil is ready, said Antoun. "You can't compare Brazil in 2000 and 2010. Brazil has changed hugely over the last 10 years thanks to legislation," he said. "Now there is a critical mass of people who are qualified to deal with problems."

(Downie, a special correspondent, reported from Sao Paolo, Brazil)

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