What is Petrobras and Why You Should Care

Published June 23, 2010

What is Petrobras?

Petrobras is the Brazilian way of putting the words gas and Brazil together. In Brazil, Petro means gas and in Portuguese, which Brazilians speak, they don’t use “z’s.” They spell Brazil as Brasil.

What Kind Of Gas Do Brazilians Use?

Brazil is known for beautiful women, cheek floss bikinis, unending soccer and sex, and gasohol. Gasohol is made from sweet things which are fermented and added to gasoline. In Brasil the chief ingredient for the alcohol portion of gasohol is sugarcane. In the United States sugarcane is eaten raw by children, when their parents can find it, and in the production of sorghum syrup which is enjoyed by southerners.

In Brasil, sorghum cane is used in two different ways. People put in in their automobiles, and they drink it. In one form it constitutes exactly 25% of a liter of gasohol, (which is far higher than in the United States), and in the other, it is called Cachaça, pronounced cah-cha-sah, and is akin to rocket fuel. A pint will cost less than a buck, and serves to make a tremendous drunk. It has a taste between that of rum and tequila. It’s the pain killer of choice by the poor people in Brasil, and the price is kept low to keep them in their place. This is no secret there.

In Brasil, small cars run on gasohol. They look a lot like American vehicles, but they are small in comparison. Most come with a standard transmission. They have plenty of zip to get around in town, but they couldn’t keep up in the United States because they aren’t made for interstate traffic. More, they wouldn’t hold up either.

The United States has been a disastrous flop at making gasohol work. However, to date, poor Brasil has had to make do with agriculturally produced gasoline additives, as in gasohol, and it has actually made a go of it, and it’s not a fluke. The times, peasants, and vast unused land mass was more than right to make alcohol growing profitable.
In Brasil there are two classes of people. Those who have money, and those who do not. Those who do not, walk a lot, or take a bus when they can. Those who have money drive the little Brasilian alcohol burners. Those with a little more money use the subcompact cars for their backup, but use SUV’s powered by diesel as their primary. In Brasil, the man with the largest vehicle is the man who has the most rights on the road. A pedestrian is simply a target.
Brasil has a strange form of gubment. Presently, it is socialist, for all intents and purposes, though their system has much in common with that of the United States. It will go on in the socialist way for a time until things become so corrupt that the military takes over and puts things to right for awhile. Then it will go socialist again, and the cycle will repeat. On the lower end, the poor has only their coconut trees, cachaca, and the Catholic Church which tells them to be happy in their poorness. People with money continue on along with their servants as usual.
Brasilians go on holiday just about every other week. The reason it works so well in Brasil, and not, say, in Greece, is that the Greece residents wanted it all…vacations, and good paychecks. In Brasil, holidays and weekends for parties and cachaca for the poor and Cerveza Antarctica and caipirinhas for the rich is sufficient. Nothing much ever changes there. The poor remain happy in their poorness.

Brasil wants a little something more… They want oil from the sea.

My guess is that Brasil is getting into oil production in a large way for more than itself. Content to let the small people continue with foot power and low powered vehicles, it would make more sense for Brasil to export the oil she finds off her shores. But who to? The U.S? Perhaps….

Enter the Dragon

More likely, Brasil has her eyes fixed on other targets, like…China. As early as 1998 the capital of Brasil, Brasilia, was receiving emissaries from China, and making them very welcome indeed. Chinese flags and welcome banners were everywhere in the Brasilian capitol. It could not be known then, by the small people, that the talks back then, if not inclusive of oil, would one day lead to cozy relations that would lead to oil. Of course, it’s only a guess, but the players know. You can bet on that. I have already given you two, above.
The president of Brasil in 1998 was not the president of today. Even so, he may have set something in motion for the man who would become president in 2002, and that man was the accomplished socialist, Luiz Inácio da Silva, or simply, Lula. Lula is a not uncommon Brasilian nick name that da Silva took for himself. In Portuguese, Lula means squid. Most Brasilians have no more love for squids than Americans, so it has to make you wonder.
Nevertheless, in 2002, self made man, Lula won the presidency, and has held it, quite legally, ever since, taking Brasil even more to the left than it already was. He’s also courted friends of the United States like Cuba, Iran, North Korea…you name it. However, I have always wondered if this was inevitable, because to my way of thinking, the U.S., especially the State Department always went far out of their way to dismiss Brazil. The point being, that if Brasil could not find a good political friend in the U.S., and being socialist by nature, why would it not seek out like minded gubments? I firmly believe, had Brasil been handled differently, particularly after Lula assumed power, that relations between the United States and Brasil might be much better.
Regardless of politics, U.S. and Brasillian entrepreneurs have never had any problem, other than that caused by taxes and the differences in monetary exchange rates, in doing business together for profit…

Petrobras, the 800 Pound Brasilian Gorilla You Never Saw Coming

According to Petrobras itself, it’s the 4th largest energy company in the world and the 8th largest company in the whole world as judged by market value. And most likely, you never even heard of them.
Petrobras is a complete energy company. It has its Brasilian hands not only in the business of extracting the oil, but also refining it, and working with all the byproducts produced by the distillation of oil as well. They perform in an integrated manner in exploration and production; downstream; trade, transportation and petrochemicals; derivative distribution; natural gas; biofuels, and electric energy.
They have upwards of 100 production platforms, 16 refineries, 30,000 kilometers of pipelines and more than 6,000 service stations. Their proven reserves are around 14 billion barrels of oil, a figure expected to double in the next few years. With the discovery of oil and gas in the pre-salt region, Brazil may become the world’s fourth biggest oil producer in 2030.
Petrobras, however, made its name in the area of ultra deep water drilling. Never a subject of much interest before, now whenever deep water is mentioned, all eyes turn to the speaker. Whereas the British Petroleum oil rig that exploded in the Gulf of Mexico was operating at 5,000 ft, Petrobras has rigs ordered that will let them push down to 10,000 feet before their drill bit ever touches the mud on the sea floor.
Unlike you may have heard, Petrobras is not strictly working only in Brasil. They also have oil interests in the Cascade and Chinook fields. This is a region located some 180 miles south of Louisiana in 8530 feet of water. They own 100% of the Cascade and 66% of the Chinook. They have rights elsewhere in the Gulf of Mexico, and are actively pinging for more oil in the whole region. Their goal with the Gulf of Mexico is to ensure mid and long term growth.
What does the United States get out of the produce of Petrobras working in the Gulf of Mexico? Nothing.

Petrobras and U.S. Refining

Petrobras also has her Brasilian hands into the U.S. refining sector. In December 2008, Petrobras America took over full control of operations at Pasadena Refinery System Inc. (PRSI), strategically located on the Houston Ship Channel with 100,000 barrel per day refining capacity. This is one more step towards the international goals in Petrobras’ Strategic Plan.
Back home, Petrobras has what it calls “downstream” activities. The main products that come out of their refineries are diesel fuel, liquefied petroleum gas, gasoline, lubricants, naphtha, fuel oil, and aviation fuel. In 2007 their domestic refineries production numbers were up and they were producing 1.8 million barrels of oil derivatives a day. Oil production without refinery capability is useless, as other countries, notably, Iran, has found out. Petrobras offers the complete solution for Brasil’s needs and future exports too.
Petrobras, ever the nature nuts, have led the way in making biofuel pay. Not content with cachaca powered vehicles, they also came out with working bio diesel fuels based on things like castor beans, cotton, peanuts, denedê oil, sunflower seeds, and soybeans, in addition to alternatives feedstock such as animal fat, oil used to fry foods and residual fat. Their thinking is that the more bio fuel they are able to make and use, the fatter Brasil’s bank account will become by exporting the good stuff.
In their own way, Petrobras has done some remarkably American things, partnering with the peasants. It’s a thing no longer done in the United States, but from time to time in history, necessity made neighbors of the haves and have nots. Hershey, Pennsylvania comes to mind.
In Brasil, Petrobras has signed papers with representatives of ordinary farmers for the supply of oleaginous plants. Their goal is to work with 80,000 families residing in the regions surrounding the plants, by signing long-term agreements, guaranteeing fair prices, distributing seeds and providing technical assistance, in addition to offering an initial program for soil correction.
A famous American once tried a partnership arrangement in Brasil. His name was Henry Ford. From 1928 to 1946, his men worked a couple of rubber plantations they had established in the Amazon, called, Fordlandia, for the express purpose of growing rubber trees. His town failed. But then, he wasn’t Brasilian, and Petrobras is.
For now, Petrobras keeps her aces face up, in the form of the deep continental shelf off Brasil. Between the oil, which has been found and exploited, and what is known to exist, and what has not been discovered in the old mud at the bottom of her seas, Petrobras will be producing for a long long time. More, you probably haven’t heard of oil production onshore in Brasil either, but it is there. Petrobras is pulling 210,000 barrels of oil and 17.9 million cubic meters of gas per day.
It looks like things just keep turning up roses for Petrobras, the oil giant you never heard of. Why then, they would feel compelled to invite George Soros to the party remains a mystery. The possible connection between Obama and Soros and Petrobras is even more deeply in shadow.