Bridges Trade BioRes • Volume 9 • Number 16 • 18th September 2009

Brazilian Funding for Deep-Sea Oil Project to Include Environmental Protection

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In response to pressure from environmental non-governmental organizations (NGOs), Brazilian President Luiz Inacio Lula da Silva has announced that social funding linked to the countries massive and controversial deep-sea oil field will have an environmental component. In addition to financing projects in education, infrastructure, culture, and poverty, the fund will target the development of projects related to renewable energy and carbon capture and storage in the seabed.

Environmentalists objected when the regulatory framework for the project - referred to as ‘pre-salt’ due to the thick layer of sub-sea salt sitting atop oil reserves - was presented on 31 August. Greenpeace says the project is Brazil’s biggest most significant environmental concern related to oil reserves. Studies by Greenpeace show that the extraction of pre-salt oil can generate some 1.3 billion tons of carbon dioxide.

Ricardo Baitelo, Campaign Coordinator of Greenpeace Energy, says the pollution created in the process would undo the positive impact of the fight against deforestation in the Amazon, adding that Brazil remains one of the largest emitters of carbon dioxide in the world.

One way the government plans to minimise the environmental impact of emissions is through the use ofcarbon capture and storage (CCS). However, Baitelo says this technology is experimental and would not be technologically feasible before 2030. Moreover, the cost of its implementation could reach hundreds of billions of dollars.

After presenting the pre-salt regulatory framework, which will only affect oil reserves that have not yet been bid on, the government sent four bills of constitutional urgency to congress, which limits the period of its proceedings in both houses to 90 days. The first one will establish a system of production-sharing in which the extracted oil will be divided between the winners of the auction, both federal and private entities. Before, the concession system was strengthened, in which the winning firm at the auction kept property over the extracted oil. Based on the new criteria, the winning firm will be the one that offers the largest bid on the oil extraction.

The second project builds on Petro-salt, a company jointly owned by the Brazilian government the Union, which is responsible for managing pre-salt oil reserves until it is bid on. This creation of the state is criticised by the private sector, which believes that Petro-salt has a disproportionate amount of decision-making power. The company has a veto on operational matters, which can cause barriers to exploitation. Critics argue that the government’s close participation eliminates competition within the oil reserves, discourages the development of new technologies, and reduces the potential for employment generation.

This story has been translated from Pontes Quinzenal.

ICTSD Reporting; “State guarantees funds that will come with the pre-salt,” GAZETTE ONLINE, 01 September 2009; “The pre-salt is added. And the pollution too,” GREENPEACE, 31 August 2009; “Pre-salt: Verba environment is included at the last minute,” JOURNAL OF SCIENCE, 01 September 2009.