Brazil-Saudi Energy Co-Operation

APS Review Oil Market Trends, June 1, 2009

Ending a two-day visit to Saudi Arabia, Brazilian President Luiz Inacio Lula da Silva on May 17 told a crowded press conference his country had pledged "to boost energy co-operation" with the kingdom but declined to join OPEC despite the discovery of massive crude oil reserves there. He said: "Brazil, on the other hand, has planned to refine, not export, its crude oil...; we would build large refineries in our country and export petroleum products with added value... And then...if it becomes necessary to talk about Brazil joining OPEC, then we will do so". He referred to his talks with King 'Abdullah and other senior Saudi and GCC officials. He said the discovery of oil and gas reserves equivalent to 5-8 bn barrels might give Brazil a powerful status as a producer. The Carioca field is 170 miles offshore in more than 6,000 feet of the water and trapped beneath a shelf of salt 500 miles long and 125 miles wide. He said: "we still don't know fully as to how much crude oil is there".

In Rio de Jeneiro, however, the state-run Petrobras has come under scrutiny in an investigation, focusing on contract bidding and tax payments. This may complicate government efforts to get more income from new fields expected to transform Brazil into a global energy power.

Lula said Brazil could be a strategic partner of Saudi Arabia in food security, noting that several Saudi and Brazilian firms had keen interest in projects to help supply food such as wheat, barley, rice and soya beans etc. At the news conference, He noted that the kingdom was interested in co-operating with the Brazilian mining giant Vale Company, which was "capable of exploiting any kind of ore, even bauxite, which is in abundance in Saudi Arabia". Speaking earlier at the Riyadh Chamber of Commerce and Industry, Lula told Saudi and Brazilian businessmen: "I am here because we need to find new partners".

Two business agreements were signed - the first on petrochemicals co-operation between Petrobras and the Saudi firm Modern Chemicals. The second was a joint venture to produce human insulin for the Gulf region, which suffers a high rate of diabetes.