Lula: Brazil needs biofuels despite 'new era' for oil

Brazilian President Luiz Inacio Lula da Silva, while acknowledging the start of exploration in subsalt areas means "a new era" for Brazil's oil industry, said his country will continue to develop biofuels.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, May 6 -- Brazilian President Luiz Inacio Lula da Silva, while acknowledging the start of exploration in subsalt areas means "a new era" for Brazil's oil industry, said nonetheless his country will continue to develop biofuels to help meet future energy needs.

"I think it's extremely important that we are conscious of the fact that while it's better to have more oil, it doesn't mean that we are going to stop investing in biodiesel and ethanol," Lula said May 4 during his weekly national radio program, Cafe com o Presidente.

"We're going to continue [developing biofuels and ethanol] because we need to renew our energy matrix," Lula said. "Brazil can offer the world the technical know-how that few countries in the world have."

Lula's remarks came after state-run Petroleo Brasileiro SA (Petrobras) recently started long-term tests at Tupi, the first oil discovery in the subsalt zone of the Santos basin—said to be the largest find in the Western Hemisphere in 30 years.

"The Santos basin is now one of the world's most important hydrocarbon regions and will be a major source of global supply for decades to come," said BG Group Chief Executive Frank Chapman.

Chapman's words underlined the optimism of the Brazilian president who told his nation, "Brazil has a chance to transform itself into a country with extraordinary potential."

During his radio broadcast, Lula called the Tupi find an "extraordinary discovery" but cautioned, "We still don't yet know the quantity of oil contained in all of the subsalt region," which reaches from Espirito Santo state southward to Santa Catarina state.

"We started the exploration, and we're going to do more or less 15 months of tests and further exploration—and after we're going to start commercial development," Lula said.

"During this time, we're going to do tests at other wells in the subsalt and, at the same time, we're going to approve a new regulatory regime for our oil legislation," the president said.

On May 1, Lula said completion of the new regulatory regime for Brazil's oil industry is "urgent" and that the working group overseeing the process does not have "much more time." Lula wants the changes in order to give Brazil a greater stake in recent finds, saying, "We have to plant the seeds now, not later."

Meanwhile, BG Group announced May 4 the first commercial oil production has commenced in the Tupi field in the BM-S-11 concession in the Santos basin.

BG said oil is flowing to the BW Cidade de Sao Vicente floating production, storage, and offloading vessel, and that the current extended well test on Tupi is expected to last 15 months, with production expected to peak at 15,000 b/d.

In June BG and its partners will commence drilling a second well on the BM-S-11 concession, with the new well also being tied back to the BW Cidade de Sao Vicente FPSO.

The Tupi field is operated by Petrobras with 65% interest, BG 25% and Galp Energia 10%.

Contact Eric Watkins at hippalus@yahoo.com.

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