Petrobras Reacts to Gulf Disaster

By Sibel Tinar, Contributing Reporter

RIO DE JANEIRO – When an explosion on the drilling rig Deepwater Horizon in the Gulf of Mexico on April 20th started sending tens of thousands of barrels of crude oil gushing into the ocean daily, the reverberations of the catastrophe inevitably raised questions regarding the future of Brazil’s own development of its off-shore petroleum industry.

Petrobras, the semi-public, state-controlled energy company and the largest of its kind in Latin America, has discovered new fields in recent years that could potentially end Brazil’s long-standing status as an importer and turn it into a major exporter of oil.

Well aware of the challenges faced by drilling in the pre-salt layer located more than 5,000 meters (3.1 miles) below sea level, Petrobras has been leading the development of new technologies to tap the wells for decades. Now it looks like it may have to do the same with state-of-the-art safety mechanisms.

Despite having no direct impact on Petrobras’ future oil exploration and drilling plans, the Gulf of Mexico disaster has raised key questions about the safety and sustainability of the oil industry in general, pushing the company to soothe public concerns over its own operations. The failure of the efforts to stop the leak from the well located a mile below the surface of the Gulf of Mexico has cast doubts in some quarters over Petrobras’ readiness to take on the ambitious task of drilling at depths of over three miles, as well as its preparedness to handle and contain a disaster should an accident occur.

To assuage these fears the company has reiterated its strong environmental safety record in recent years and officials in charge of pre-salt exploration have pointed out that the lower pressure and temperatures associated with this type of drilling compared to that in the Gulf of Mexico greatly reduce the chances of an accident.

Nevertheless, a leak of about 1,500 liters of oil identified on June 7th at the Campos Basin, 160 kilometers off the coast of Macaé in northern Rio de Janeiro state had to be immediately contained by the dispatch of the Emergency Plan, according to Petrobras. Officials were notified about the accident, and an inquiry has been opened to find the causes of the leak.

Ricardo Azevedo, the security manager of Petrobras, has stated that while an accident is always a possibility, Petrobras remains confident in its ability to respond to emergency situations.

“The ‘advantage’ of pre-salt is that the drilling points are located much farther from the coast, which gives us more time to respond effectively,” Azevedo said. He also emphasized Petrobras’ commitment to seek detailed information on, and learn from, the technical causes of the Gulf of Mexico incident, and insisted that until a reliable report becomes available, no serious conclusions can be drawn.

Brazilian multi-billionaire businessman and now oil speculator Eike Batista claimed that while the Gulf of Mexico spill is likely to increase the costs of future oil exploration due to creation and implementation of improved security measures, it was unlikely to derail the business altogether. “The cost will rise for sure, but this is not something that will impede the efforts,” he said.

The market seemed to agree with Batista’s words, as Petrobras’ announcement last week of a new discovery in the Marlim Field resulted in something of a recovery for the company’s share price.