Gas Imports Up as Consumption Grows

By Stephen Eisenhammer, Contributing Reporter

RIO DE JANEIRO, BRAZIL – Consumption of gasoline in Brazil continues to reach record heights as the country’s development powers forward, new data has shown. The first three months of 2012 registered new peaks for energy usage, as industrial and residential demands show a steady rise, so does gas importation.

Gasoline consumption in the first quarter of 2012 showed a 34 percent increase on the same period last year, according to Petrobras downstream director, Paulo Roberto Costa.

To meet demand, Petrobras, the Brazilian state-run energy giant, expects to import 33 percent more daily fuel compared to 2011, with the import of gasoline hitting 80,000 barrels per day and diesel reaching 160,000 barrels per day.

The rise in demand for gasoline is linked both to high ethanol prices, which have soared as a result of a deep-rooted supply problem, as well as an increase in the number of cars on the roads in Brazil. The majority of cars in Brazil run on a mixture of gasoline and ethanol, however, high ethanol prices have pushed up the consumption of gasoline at the pump.

Gasoline and diesel imports are costly for Petrobras, who are forced to sell the fuel to the domestic market for less than they pay on the international market, upsetting the company’s trade balance. Brazil was self-sufficient in fuel consumption until 2010, however, production since then has failed to keep up with demand.

For many this comes as a surprise given the huge pre-salt reserves discovered in 2007. This huge reserve, however, remains difficult to access, with some drilling going as deep as 3,000 meters below the sea floor, and the infrastructure will take time to develop.

The other issue is Petrobras’ need for more refineries. The company is currently operating at the limits if its refining capacity and is in danger of being forced to export crude oil and import value-added derivatives, a move which former Petrobras president Jose Sergio Gabrielli once described as “long-term suicide.”

On Sunday, April 3rd, Brazilian daily Folha de São Paulo reported that Petrobras, is in talks to buy the privately operated Manguinhos refinery in Rio de Janeiro for at least R$2 billion.

By 2020 Brazil should be an oil super-power, producing an estimated 4.9 million barrels per day, and exporting around 1.5 million barrels of this. However, for the time being it remains an importer, if only a small one. This puts current pressure on Petrobras, which analysts say is harming its short-term prospects.

The company reported disappointing results for 2011, largely the result of high investment costs (to develop the pre-salt) out-pacing increases in production. As an example, Petrobras’ oil production in February this year fell 1.1 percent compared to the month before.

In many ways this is to be expected and the gains will come further down the line, with Petrobras expected to become the world’s biggest publicly listed energy company within the next eight years (it is currently third). However, the fear is that the energy giant has over-stretched itself, pushed on by Brazil’s new nationalism which demands that the oil reserves be used to further the country’s domestic industry and not foreign-owned companies.

This has seen Petrobras embark on the most ambitious investment plan being implemented by any oil company in the world at the moment, amounting to US$224.7 billion for the period between 2011-2015.