President Luiz Inacio Lula da Silva said Brazil will at least triple its oil reserves by exploring a new offshore area that includes the Western Hemisphere's largest discovery since 1976.
``This is very promising for Brazil,'' Lula, 62, said in a Bloomberg Television interview today at the presidential palace in Brasilia. ``We have to take advantage of this oil to develop the country.''
A tripling of proved reserves from 12.6 billion barrels would move Brazil into the world's top 10 nations in oil supplies, according to estimates from London-based BP Plc. Brazil, Latin America's largest economy, would overtake Nigeria, currently No. 10 with 36.2 billion barrels, and put it close to Kazakhstan, which has 39.8 billion barrels.
Lula, who is moving into the last two years of his final term, said he has changed his mind and won't seek membership for Brazil in the Organization of Petroleum Exporting Countries because he wants the nation to focus on refining its growing oil output, not just selling crude abroad.
``I want Brazil to export refined products,'' said Lula, who wore a light gray suit and a black tie peppered with white dots. ``I'm under no illusion that Brazil will join OPEC. I used to be, but am no longer.''
Petroleo Brasileiro SA, the state-controlled oil company known as Petrobras, said in November that its Tupi field may hold 8 billion barrels of recoverable oil equivalent, the biggest discovery in the Americas since Mexico's Cantarell field.
Pre-Salt
Tupi is part of an area called pre-salt that stretches 800 kilometers (500 miles) off the coast near Rio de Janeiro and Sao Paulo. Such reservoirs beneath as much as 3,000 meters (9,840 feet) of water and 7,000 meters of seabed may contain 50 billion barrels of oil, according to Peter Wells, director of U.K. research firm Neftex Petroleum Consultants Ltd.
Oil prices, which jumped above $140 a barrel to a record today, will probably stay high enough to justify exploring the pre-salt fields, Lula said. The Tupi deposit and nearby offshore prospects may cost $240 billion to exploit, said Neftex's Wells, a former Royal Dutch Shell Plc exploration manager.
Lula declined to provide an estimate for the pre-salt reserves today, saying the exploration is just starting. The government is working on new regulations to ensure the state keeps more of the oil profits from the pre-salt fields than it does from other wells so there's more money for education and health-care investments, Lula said.
Poor, Rolexes
``It's a chance for poor Brazilians to use this money as opposed to having people with a lot of oil and three or four watches and a Rolex in their pockets,'' said Lula, who grew up in poverty. ``We want to take advantage of these riches to ensure that Brazil can take a great leap forward.''
``Not only is God a Brazilian, he's now living in Brazil,'' said Lula.
Lula, whose rise to power panicked investors and brought the country to the brink of defaulting on its debt in 2000, has started the second half of this term with the nation boasting the highest credit rating in its history. After using the trust of the poor to buy time for his orthodox economic program to yield fruit, he has said he'll deliver on his promise to make sure the benefits of growth are also felt by poorer families.
Part of the future pre-salt oil revenue will also be used to enlarge a sovereign wealth fund Brazil is creating with about 14 billion reais ($8.7 billion) this year, Lula said. The fund will help finance the expansion of Brazilian companies overseas, he said.
Oil Refineries
Petrobras is investing more than $10 billion to build two refineries to handle expanding output of heavy crude oil from its Campos basin fields, the source of about 80 percent of Brazil's output.
A 150,000-barrels-a-day refinery in Rio de Janeiro will make products for the petrochemical industry and a 200,000- barrel-a-day refinery near the northeastern city of Recife will produce vehicle and other fuels. Petrobras also plans to build at least two more Brazilian refineries.
The government and the state development bank own 37.5 percent of Petrobras's preferred and common shares, and about 56 percent of the voting shares.
Lula said he is determined to prevent inflation from exceeding the government's 4.5 percent target. As evidence of his intent, he cited the decision to raise the government's primary budget surplus before interest payments to 4.3 percent from 3.8 percent of gross domestic product.
Threat of Inflation
``I worked a long time inside a factory and have lived in this country with inflation of 80 percent a month,'' said Lula, who lost the small finger of his left hand in an industrial accident at 19. ``I know the impact this has on a person who receives a monthly salary. And it's these people I want to protect.''
Lula achieved the transformation of Brazil's economic standing by combining a pragmatic mix of populist policies and capitalist economics that set off a 12-fold gain in the stock market's value in dollar terms and created a record number of Brazilian billionaires.
Since 2003, the Brazilian currency gained 120 percent against the dollar and the benchmark stock index has jumped fivefold, beating all major markets in the world. Brazil became a net foreign creditor for the first time in January as rising export revenue boosted international reserves to more than $190 billion. Standard & Poor's raised Brazil's credit rating to investment grade for the first time on April 30.
Shifting Perspectives
``I don't think there's much contradiction in what I used to say and what I say now,'' Lula said. ``When I was a candidate, my world was one thing. When I was a metal worker, my world was my union. When you're the president, you have to care for companies of 10 workers as well as those with 20,000 employees.''
Lula said the U.S. will eventually use Brazilian ethanol fuel, which is made from sugarcane, because it's 50 percent cheaper to make than corn ethanol and doesn't curb food supply. U.S. Democratic presidential candidate Barack Obama's comments that it wouldn't be in the U.S.'s interest to replace gasoline with Brazilian ethanol fuel are just campaign rhetoric, Lula said.
``I'm convinced that whoever wins the election will start using ethanol made from sugarcane,'' Lula said, speaking in a wood-paneled room decorated with paintings by Brazilian artists Di Cavalcanti and Djanira da Motta e Silva.
Lula said he told President George W. Bush that the U.S. should help Central American countries start producing sugar ethanol for export to prevent social tension.
Talking to Counterparts
The Brazilian president said he's been talking to Bush, U.K. Prime Minister Gordon Brown and other heads of government about the need to reduce farm subsidies and invest in Africa to boost food output.
At the next Group of Eight meeting, in which countries such as Brazil and Mexico will also participate, Lula said he will propose a discussion about how potential speculation in futures markets for commodities may be driving up prices.
The global food shortage is a ``great opportunity'' for Brazil to become the ``bread basket'' of the world, Lula said, adding he will announce a government program next month to finance farmers and double their output.
``Brazil has found its path and I believe that there is no way back. From here on we will only improve,'' Lula said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ajMY92dNzAGs&refer=home
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