Brazil to play key role in energy future

Russell McCulley
Monday, October 1, 2012

With massive investment and aggressive technology development required to match world energy demand in coming decades, South America’s ‘southern cone’ will have a big role to play. Russell McCulley reports from Rio de Janeiro.

Thanks in large part to Brazil’s pre-salt discoveries, unconventional gas prospects in the US and the Gulf of Mexico’s nascent deepwater plays, ‘peak oil’ warnings from a decade ago proved to be premature, US Energy Information Administration chief Adam Sieminski told an audience midway through this year’s Rio Oil & Gas expo and conference.

Sharing a dais with World Petroleum Council president Renato Bertani and Jerome Ferrier, president of the International Gas Union, Sieminski said the EIA, the US Department of Energy’s statistics division, projects that the world holds nearly ten times the 600tcf of shale gas already proved in the US. Moreover, the US has pledged $5 million to investigate the use of marine methane hydrates for gas.

‘The Department of Energy calls these methane hydrates the world’s largest untapped fossil energy resource, twice as abundant as all of the remaining natural gas and petroleum reserves in the whole world,’ Sieminski noted.

‘The conclusion that I draw from all of this is that resources are not going to be a binding restraint.’

But Sieminski and his fellow panelists acknowledged that efforts to harness those resources will not come easy, or cheap. Bertani, CEO of Rio de Janeiro-based Barra Energia and the first representative from Brazil to hold the top job at the WPC, pointed out that world oil consumption is projected to grow by 2.3% annually, to 108-110 million barrels per day by 2030. At the same time, he said, we will witness an annual production decline of 3.5% from fields currently onstream, leaving a gap of around 60-65 million barrels per day that will have to be filled to keep pace.

Rio Oil & Gas conference panel in session (left to right): EIA chief Adam Sieminski, WPC president Renato Bertani, IBP president Joao Carlos de Luca (moderator) and IGU president Jerome Ferrier.

‘Nevertheless, the reserves are there and are constantly being replaced,’ Bertani said.

To keep the taps running, he continued, could require an investment of up to $20 trillion between now and 2030.

While some estimates put the remaining global oil reserves at 1.45 trillion barrels, including difficult-to-produce very heavy oil, ‘there is no single company or group of companies that will singly be able to place 60 million barrels of oil per day in the market’, Bertani said.

Other potential stumbling blocks are restricted access to acreage and a shortage of workers. ‘We need trained people, and not only here in Brazil,’ he said.

Transnational potential

Noting that ‘Brazil will play a key role in the energy future’, Ferrier focused on the potential for a transnational LNG industry in the southern reaches of South America, and called for development of unconventional resources in Brazil, Argentina and Bolivia. The IGU president said industry groups, South American leaders and stakeholders should meet to discuss the development of LNG infrastructure, including a transcontinental gas pipeline, and ‘regulatory integration’ to ensure safe practices.

‘Not all countries are on the same level in terms of safety,’ Ferrier said.

Globally, said Sieminski, the conditions essential for industry growth come down to five points.

‘We need fair and consistent legal systems in the countries that are producing the energy,’ he said. ‘Second, governments have to be responsible to their people and to the companies that are operating in their countries.’

Strong capital markets, innovative technology and ‘competent education, universal education’ are critical to sustain growth.

‘These conditions are the basis for providing the foundation of economic growth. But they are also necessary for dealing with the challenges of providing energy supply in the 21st century, or any other century,’ he said.

Sieminski said the money to fuel growth in the industry should be readily available ‘as long as markets are allowed to function’.

‘International oil companies will invest if the rate of return is attractive. This does not even have to be a problem for state owned oil companies as long as the model they are working under is appropriate for the goal. Saudi Aramco, for example, has proven to be a global leader in terms of both oil production and advanced technology.’ Others, like Venezuela’s PDVSA, struggle to maintain production as governments extract a heavy toll from profits, he said. Sieminski acknowledged that oil producers are often hampered by the difficulty of planning investments in an industry beset by price volatility and the ‘problem of statistical transparency’ in many developing, resource-rich and energy-hungry countries.

But the pre-salt revolution in Brazil, the oil sands of Canada and America’s shale boom ‘could dramatically alter the politics of oil in the next few decades’, he said – provided technology keeps pace.

‘Spending on research, demonstration and development of new energy technology, both in supply and demand, and in operations and controls, has the potential to transform our energy supply in the 21st century in ways that we could hardly have dreamed only a few years ago.’ OE

Categories: Energy Oil South America Shale

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