The Petrobras way

A Petrobras station in Rio de Janeiro, Brazil.

TEXT OF STORY

Kai Ryssdal: Bob Moon was telling us before about Saudi Arabia and how it's working to get a handle on the price of crude. The Saudis are sort of a household name when you're talking about oil. OPEC, Exxon Mobil... there are some groups and companies that're just institutions.

But you might never have heard of the fastest growing oil company in the world, although you will soon.

Over the past 10 years, Petrobras, Brazil's state-owned oil company, has doubled its production. It's on track to double again over next decade and in the process become a major factor in the U.S. oil equation.

From the Americas Desk at WLRN in Miami, Marketplace's Dan Grech reports.


Dan Grech: When Petrobras got its start in 1953, its oil output amounted to an oil leak: less than 3,000 barrels a day. Industry insiders dismissed it as Petrosaurus.

Today, it sits on one of the world's largest deepwater reserves of crude oil. It's the world's sixth largest corporation with a market value greater than Microsoft and GE and it's the economic engine behind an emergent Brazil.

Jeremy Martin directs the energy program at the Institute of the Americas.

Martin: Brazilians like to claim that God is a Brazilian. You know, it's tough to argue these days with the run Petrobras is on.

So how did Petrobras go from industry laggard to industry leader? It started with a lucky break.

Most coastal areas lack oil. The deep waters off the coast of Rio de Janeiro conceal megadeposits of crude.

But it took more than divine intervention get the oil out. For decades, Petrobras has been developing one of the most sophisticated deepwater drilling programs in the world.

Energy expert Robert Bryce is author of "Gusher of Lies."

Robert Bryce: It requires robotics, ultra-high pressure production lines, sophisticated platforms that can hover in one place in ocean currents that are extremely strong. This is the modern equivalent of the space program.

And nearly as expensive. Last year, Brazil discovered the Tupi oil field, the biggest find in the Western Hemisphere in three decades. But developing Tupi will be Petrobras's greatest challenge yet. Its light crude lies beneath a mile of water, two miles of sand and bedrock and a mile-thick dome of salt. Extracting the oil could cost $240 billion, making Tupi and nearby fields among the costliest ever developed.

Robert Bryce:

Bryce: Without oil at $120, $130 a barrel, some of these projects that they're involved in offshore might not go forward.

Petrobras has doubled production while Latin America's other state-owned energy giants in Mexico and Venezuela have seen steep production declines.

Brazil's emergence as an energy superpower could shift the balance of power away from leftist Venezuela. That would come as welcome news to U.S. policy makers.

Bryce: In a decade or two, we could be importing more oil from Brazil than we are from Venezuela.

The key to Petrobras's success, experts say, is governance. Petrobras is state owned, but it's ruled by market forces.

Luis Cesar Stano has worked with Petrobras for 31 years.

Luis Cesar Stano: We see ourselves as a market company, not as a governmental company.

Petrobras has opened itself to foreign competitors, even in its territorial waters. It has an independent board of directors and it uses U.S. accounting standards.

Jorge Pinon is a former Amoco executive now with the University of Miami.

Jorge Pinon: They have been able to put the politics aside and really behave like a true business. Petrobras is a business case that is going to be studied in business schools for many years to come.

Pinon says Petrobras has brought a new sense of possibility to Brazil.

Pinon: That frontier, that promise, that long-term view, that vision of new riches... That is the story of Brazil. That is also the vision of Petrobras.

That vision extends to the United States. Petrobras owns a large stake in a Texas refinery and plans to drill for oil in Utah. It's investing $5 billion to explore the U.S. Gulf of Mexico. Eventually, it wants to introduce Petrobras branded gas stations to a street corner near you.

I'm Dan Grech for Marketplace.

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