Wednesday, March 20, 2013

What the Presalt Deposits Mean to the Future of Brazil

Brazil is sitting on one of the world’s largest deposits of oil and natural gas. These natural resources will allow the economy of Brazil to grow through refinery and exportation of these reserves. The question remains, how do they get it out of the sea floor? The technology is available for Brazil to allow drilling to take place and get through the sea floor and the 2000 foot salt deposit where the oil and gas reside below.

The challenge the Brazilians face are the restriction put in place by the government to prevent foreign multinational firms from dominating the market. The government of Brazil has placed protectionist policies around allowing technology and innovation to support Brazil and it’s economy. In order to conduct business in Brazil you must source everything you need in the country or face import and export tariffs ranging from 50%-95% for the technology you bring in. The policies have the potential to hurt the economy and delay the extraction unless some compromise is found. Brazil does not have the infrastructure and manufacturing capability to develop the tools, systems and equipment needed for the complex extraction of these reserves. The result is delays and if the technology needed is imported the price per barrel of oil will start to rise due to the high tariffs.

Everything from the drill bits to the oil rigs need to be developed domestically. The scale and difficulty of drilling down 2000-3000 feet below the sea floor and then another 2000 feet through a collapsible salt layer is posing huge challenges to the largest oil company in Brazil; Petrobras. In speaking with them they feel confident that through their research facility and local partnerships they can overcome the technological challenges ahead.

With the eyes of the world bearing down on the country during the World cup in 2013 and the Olympic games shortly after in 2016, I hope they are successful. But the reality is in my opinion that they will not be able to meet their timeline unless they partner with foreign multinational firms and allow them to source their technology and equipment for outside the country. According to the government of Brazil and Petrobras the future is bright and the presalt reserves will help grow the Brazilian economy for decades to come. I hope they are right  but I see storm clouds just beyond Sugarloaf Mountain.

Chad Haskell

Chad Haskell is an accomplished facility operations executive. He is the Head, Facility Operations for Novartis Vaccines and Diagnostics in Cambridge, Massachusetts. Chad holds a BA from University of Massachusetts Boston, and a Facilities Management Certificate from Boston University.

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