Brazil’s President: Rules On Oil Safety Apply To All Companies

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March 22, 2012

RIO DE JANEIRO (Dow Jones)–All oil companies operating in Brazil, both domestic and foreign, must respect safety protocols without exception, Brazil’s President Dilma Rousseff said Wednesday.

Responsibility is the key as Brazil reconciles oil exploration with environmental protection and as “presalt fields bring new oil prospection and production realities” worldwide, Rousseff said in Rio de Janeiro, as Magda Chambriard took office as president of Brazil’s national oil regulator, ANP.

ANP has a strategic role to play in safety, as well as in development of the country’s ethanol industry–one of Brazil’s paths to the future–and in monitoring national content policies, Rousseff said. Content policies require companies draw from domestic sources for labor and equipment needs.

Rousseff’s words came hours before a federal prosecutor in Brazil on Wednesday filed charges against U.S. oil company Chevron (CVX), drilling-rig operator Transocean Ltd. (RIG) and 17 executives, accusing them of environmental crimes related to an offshore oil spill in November. An estimated 2,400 to 3,000 barrels of oil seeped from the seabed at a well in Chevron’s Frade field in Brazil’s Campos basin. Chevron said it will defend itself vigorously against the charges.

Rousseff added that national content policies in the oil sector are crucial to prevent Dutch disease and the “oil curse,” which may afflict oil-producing countries. Dutch disease is an economic phenomenon whereby some sectors of a country become uncompetitive due to an overvalued local currency, often caused by natural resource wealth, including oil. The term derives from the Netherlands’ experience with the situation in the 1960s. The oil curse refers to overreliance on oil as the basis for a country’s wealth.

“The entire national content policy in oil aims to guarantee we’re not a country that will be merely a crude-oil producer. We’re a country that will be a producer of oil derivatives,” Rousseff said, adding this involves creation of new companies and jobs in the oil supply chain.

Brazilian Mines and Energy Minister Edson Lobao said Brazil “has open frontiers” and that “foreign capital is welcome in Brazil,” including in development of the country’s oil resources, he said.

While Brazil until recently counted its oil reserves at 12 billion barrels and outgoing ANP president Harold Lima had given estimates of 80 billion to 100 billion barrels, “the most optimistic” put Brazil’s possible oil resources at as much as 150 billion barrels of oil, Lobao said, without citing sources.

-By Diana Kinch, Dow Jones Newswires

Copyright © 2012 Dow Jones & Company, Inc.

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