Air Date: Week of December 2, 2011

Ipanema beach in Rio de Janeiro is within 200 miles of the recent Chevron oil spill. The Brazilian government wants to protect the beach and the region as Brazil gets ready to host the World Cup and the Olympics. (Photo: Cyro A. Silva)

Chevron recently admitted responsibility for an oil spill off the coast of Brazil. Reporter Ken Rapoza tells host Bruce Gellerman that Brazil is banking on oil for economic development and this accident is unlikely to change that.

Transcript

GELLERMAN: Brazil has oil fields of dreams. In recent years geologists have discovered mega oil fields off the coast, deep under the South Atlantic, miles below rock, salt and sand. Chevron, America’s second largest oil company, began tapping into Brazil’s oil wealth about 2 years ago, but now a spill at the company’s first well has cast doubts on Chevron’s ability to safely drill so deep under the sea.

Joining me is Ken Rapoza. He was a reporter for the Wall St. Journal and Dow Jones in Brazil. Now he's back stateside, and writes about business in Brazil for Forbes online. Hi Ken, welcome to Living on Earth!

RAPOZA: Thanks, Bruce.

GELLERMAN: So what went wrong with this well?

RAPOZA: Well, it’s complicated. It becomes a technological issue for Chevron. When you’re drilling into rock, you have to use heavy mud that contains the oil as it’s coming out of the ground, okay? They didn't use it properly, and all hell broke loose. At first, they said that it was a crack in the ocean floor - they blamed nature basically - and then, within about 48 hours, they came clean and said, you know, "it was our fault" and they take full responsibility for it. 2,400 barrels of oil leaked out of the Frade Field, which is mostly owned by Chevron.

GELLERMAN: 24 hundred barrels of oil - kind of a drop in the ocean compared to BP’s Deepwater Horizon disaster on the Gulf.

RAPOZA: Sure, you can’t compare. You can't compare the two. Yeah. And Chevron is very happy that you can’t compare the two.

GELLERMAN: But it was TransOcean, the same company that operated the BP rig, as operated Chevron’s rig.

RAPOZA: Absolutely, and both of them are under investigation right now, from the National Petroleum Agency of Brazil, the federal police and Brazilian Navy are all checking it out. So, Chevron right now isn’t drilling anywhere in Brazil and they face 28 million dollars in fines, more fines possibly on the way.

GELLERMAN: This field that they were drilling in is really a precursor to the big show. Brazil has a lot of oil off the coast.

RAPOZA: Yeah, a lot of oil. But, this field was called the Frade Field, it has about 300 million barrels of oil, it produces now about 79 thousand barrels of oil, I believe, a day. There’s been a lot of major oil discoveries far off the coast of Sao Paulo and Rio States, and they’re pretty much situated in two big basins - the Campos Basin and the Santos Basin.

And they’re both about 200 miles off the coast of both states. And they’re in deepwater; some of them are under lots of bedrock and salt. And they produce - both of those two basins - produce about 1.8 million barrels of oil a day, over 27 million cubic meters of natural gas and the biggest basin of all - the Santos Basin, which is the most famous of the two - has an estimated 33 billion barrels of oil.

GELLERMAN: Oh, that’s real money!

RAPOZA: That’s real money. And PetroBras, the Brazilian oil company just discovered more oil there, you know, on November 25th. So it’s a very productive field - if you’re Chevron, if you’re Exxon, if you’re Royal Dutch Shell, if you’re BP, if you’re any multinational oil company, you want to be deepwater Rio and Sao Paulo.

GELLERMAN: Well, that’s the problem: this is very deep water and, while it’s sweet crude, which is highly valuable, getting to it is going to be really difficult. Can they drill that far under the sea right now with the technology we have?

RAPOZA: Yeah, they sure can. They do it. PetroBras is the leader of it, but they definitely do it, yeah absolutely.

GELLERMAN: PetroBras being the Brazilian state oil company.

RAPOZA: Correct. PetroBras is really investing billions of dollars inventing new technologies, coming up with new technologies to drill through rock and salt to get that oil. And they’re doing it, and they’re going gangbusters on it and that’s part of their growth plan.

GELLERMAN: People in Brazil really hold PetroBras in high regards. I think it’s something like NASA during the space shot here.

RAPOZA: Yeah, those oil discoveries were equivalent of, you know … that’s the Brazilian moon landing. If you did today’s dollars compared to what we spent on the moon landing, it’s almost equivalent to what PetroBras is spending on drilling and oil discoveries and technological innovations to pull that oil out of the ocean.

GELLERMAN: So when people in Brazil hear about the problems that Chevron has had these past few weeks, what’s the sentiment there?

RAPOZA: It’s very bad PR for Chevron, and Chevron knows it. They’re already considered a bad neighbor in South America. AlterNet, which is an alternative online news agency - they mostly cover issues related to the environment and social causes - and they just ranked Chevron the worst energy company in the world. The Brazilian government is not going to stand for a multi-national company spilling oil in the Atlantic. I think it’s tolerable at this point only because no oil has washed up on the shores of Copacabana and Ipanema in time for the 2014 World Cup.

GELLERMAN: So, the long-term effects of this oil spill - do you think it will put the brakes on the development of these three mega-fields?

RAPOZA: No. There’s no chance of that. I think that Brazil wants to develop these oil fields. It’s extremely important for Brazil because Brazil looks at itself in this light: they say, you know, look what happened to Norway when they discovered oil in the North Sea, look what happened to the technology that was developed out of Norway - look what happened to the know-how and the engineering expertise that happened to that country.

Look what happened to Texas - what became of Houston because of the oil discoveries in Texas in the 60s and 70s. We want that to happen in Rio de Janiero, and the government is planning on that. And in order for that to happen, you have to have clean, perfect, as flawless as can be, oil drilling and natural gas drilling operations in those two basins. So, it is extremely important for the government to get this right.

GELLERMAN: Talking to us about Brazil’s oil present and future is Ken Rapoza. He writes about Brazilian business for Forbes online. Well Ken, thank you so very much.

RAPOZA: You're welcome, Bruce!

[MUSIC: Thievery Corporation “Bario Alto” from Mirror Conspiracy (Eighteenth Street Lounge 2004).]

 

Links

Chevron Responds to the Oil Spill