Lula: new oil find will have no impact on biofuel investments in Brazil

Last week, Brazil's state-owned oil firm Petrobras announced the discovery of a large offshore oil province stretching from Espírito Santo, Campos, and Santos Basins, in ultra-deep horizons, and in pre-salt rocks. Petrobras analyzed and tested the ultra-deep Tupi area in the region and said it has a recoverable reserve of between 5 to 8 billion barrels of light oil and natural gas.

According to Petrobras' president Sergio Gabrielli, the oil and natural gas field will put Brazil among the world's ten leading oil producing countries. However, some in the 'Peak Oil' community have downplayed the importance of the find, saying it only constitutes around 70 days of global oil consumption. The number of similar finds has declined steadily over the past years, and the Tupi field lies under 2,140 meters (7,060 feet) of water, more than 3,000 meters (10,000 feet) of sand and rocks, and then another 2,000-meter (6,600-foot) thick layer of salt. Getting the oil out will be a formidable challenge. And it will take years because the petroleum is so deep under the earth's surface, meaning any impact on oil prices will not come soon. Nonetheless, for Brazil the new reserve signifies a boost to its economy.

At the same time, Brazil is also the largest producer of biofuels, with Petrobras planning to play a key role in the sector. Its ethanol industry, located in the South of the country, produces a highly efficient fuel from sugarcane, which reduces carbon dioxide emissions by up to 80 percent compared to gasoline. The question now is: will the Tupi oil field alter Brazil's biofuels investment pattern?

Answering the question during his address at Radiobrás, president Luiz Inácio Lula da Silva said this is out of the question:

On the contrary, the matter of biofuels plays two important roles. The first one is to increase the importance of Brazil to the global energy matrix that we wish to build, in order to fight pollution in the planet. We all are aware of global warming, and we all know that petroleum is one of the causes of this problem. Therefore, we will keep on investing in biofuels. - President Lula

So how many hectares of land would Brazil have to devote to growing sugarcane if it wanted to match the energy contained in the large Tupi oil field? Let's assume 7 billion barrels can be recovered. A hectare of sugarcane yields around 6000 liters of ethanol with current conversion methods - roughly equivalent to 23 barrels of oil. Assuming that the cane fields remain productive for 50 years, Brazil would have to grow sugarcane on 6.1 million hectares of land, or 0.7 percent of the country's total area. With second generation biofuel conversion techniques, about half that area would be required.

The president referred to this logic of renewability - the fact that cane remains highly productive for decades - when hinting at Brazil's biofuel plans, which will not be slowed down. He pointed at the fact that despite the oil find, the country will also step up its efforts to lead further biofuel development in Latin America and Africa:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: ethanol :: biodiesel :: petroleum :: Brazil ::

The world will inevitably need to adopt a mix of biofuel into oil. We have already been mixing ethanol into it, a 25% mix is already used in Brazil. Europe has decided to mix 10% by 2020. And in January we will start mixing 2% of biodiesel into diesel oil. Afterwards, we are going to increase to five, then ten, and by the time everyone is doing it, then we will be able to reduce carbon emission, and generate millions of jobs in Brazil, Latin America and Africa, which has a huge area available for planting, and we will also help family agriculture. - President Lula

Just before the major oil find, Petrobras announced its long term strategy, which included a shift to biofuels. In a first phase, it will start approving five joint venture projects worth US$1 billion to produce ethanol from the Goias and Mato Grosso states this week, with the aim of getting 20 ethanol projects going by 2012 (previous post).

The company's strategic and business plans for the coming years include the aim to produce 4 billion liters of ethanol (equivalent to 50,000 barrels of oil per day) by 2012 for which it needs at least another 15 projects (besides the five already selected). Petrobras has been studying around 40 sugar mill projects for exports mainly to the Japanese market since early 2007.

Petrobras has also signed a series of collaboration agreements on biofuels with other (oil) companies, including Norway's Statoil (here), with India's state-owned Bharat Petroleum (here) and with Portugal's Galp Energia (earlier post).

Map: the Tupi oil field, located offshore in ultra-deep waters. Credit: BG Group.

References:
Agência Petrobras de Notícias: Petrobras discovers Brazil's biggest oil-bearing area - November 8, 2007.

Agência Brasil: País não deixará de investir em biocombustível por causa de nova reserva, afirma Lula - November 12, 2007.

Biopact: Petrobras starts approving joint ventures worth $1 billion to set up 20 new ethanol plants - September 27, 2007