Why this is important to Wisconsin businesses: Because of the reserves' location in the deep sea, research and development is needed along with related equipment, goods and services.
When Brazilian pre-salt oil—in the deep sea underneath salt areas, requiring large-scale investment to be extracted—was discovered in 2008, it brought great optimism in the country, but the clock is ticking on the timeline for extracting these resources.
Brazil is the world’s tenth-largest oil producer and the largest in Latin America. In October 2017, its oil production recorded 2.6 million barrels per day, while natural gas accounted for 115 million cubic meters per day. From 2005 to 2016, oil and gas production in Brazil generated approximately $75 billion in government participations alone (including royalties and special participation).
Although these figures are significant, the oil industry is still only a fraction of what it could be in Brazil, and its full potential is still unknown. Less than 5% of sedimentary basins are approved for oil and gas exploration purposes, and only 30,000 wells have been drilled so far. The breakup of the Petrobras monopoly in 1997 and annual rounds carried out through 2008 brought an injection of new funds into the industry and proved that Brazilian oil and gas have strong potential. The ninth bidding round in 2007, for example, offered fields with production capacity that surpasses 8 million cubic meters per day.
However, the auctions that brought this new activity were discontinued in 2008, and only resumed five years later. This gap caused a decline and a delay in exploratory activities. Later, this reduction intensified due to a substantial drop in oil prices and reduction in investment reduction by Petrobras due to political turmoil. Specifically, drilling of exploratory wells dropped abruptly, causing discoveries to shrink and development to fail.
Aware that the world is heading in the direction of reducing the exploration and use of oil and increasing exploration of cleaner sources of energy, but that oil is expected to maintain its global relevance for some time to come and that demand is expected to begin declining in the 2030s, Brazil is strategically rethinking the industry at a number of different levels. With ongoing improvements in oil and gas regulation and compliance and a steady return to political stability, Brazil now looks well placed to remain one of the world's key oil and gas producers.
With this situation of having plentiful resources to explore and scarce time to make it happen, Brazil plans to invest $455 billion between now and 2054, with a projected return of $1.5 trillion. Brazil’s government and companies in the oil and gas industry have the chance to turn these reserves into wealth before the decline in world demand for oil and gas begins. This wealth, in turn, can help finance the country's energy transition towards a low-carbon economy, to comply with the 2015 Paris climate accord. Given all this, the need is more urgent than ever for Brazil to invest in technology and research.
Due to the specific requirements for pre-salt oil exploration, there is a need for investment in research and development, innovation and modern technology, creating promising opportunities for suppliers of related equipment, goods and services, including underwater robotics and other developments in deepwater equipment, software development such as nanotechnology, and advances in field flow for seismic modeling.