Initial euphoria over the magnitude of the oil discovery, located in the offshore Tupi field, led Brazilian President Luiz Inácio Lula da Silva to announce his intention to join OPEC, the Organization of the Petroleum Exporting Countries. Petrobras, the country’s state-run oil company, estimated the field had about 8 billion recoverable barrels of oil, and the broader area surrounding the field might hold as much as 100 billion barrels. The Tupi field probably won’t be productive for at least another five years, and it will be difficult and costly to develop, but the Economist Intelligence Unit says there are indications that the possible reserves might be even larger than the government estimates. In a region that is energy-starved—Argentina and Chile are both struggling with energy crises—Brazil’s finds will give it significant leverage. According to the U.S. Energy Information Administration, Brazil had the second-largest crude reserves in the region prior to the Tupi discovery.
Brazil is already a powerhouse in alternative energy; it produces a significant portion of the world’s ethanol and has worked to parlay its leadership in the industry into energy deals across the developing world. It hopes to create an international market for biofuels that brings development to poor countries. Conditions are particularly good for developing biofuels in Central and South America. Last August, Lula and Chavez both made trips in the region, Lula touting alternative fuels, and Chavez offering energy pacts. “There is this subtext of oil versus biofuels,” said Michael Shifter, vice president for policy at the Inter-American Dialogue.
