Brazil may delay offshore oil drilling

MIAMI, Oct. 29 (UPI) -- Production at Brazil's newly discovered offshore oil fields may be delayed by the lack of legislation to oversee the finds, according to energy officials.

Since the first large offshore oil deposits discovery in 2007, Brazilian lawmakers have begun seeking ways to spend what surely will amount to a multibillion-dollar windfall.

However, profits from what some experts say is a 55 billion-barrel reserve off the Brazilian coast are not guaranteed, considering that investment in the deepwater drilling is expected to surpass $100 billion.

Brazilian President Luiz Inacio Lula da Silva, a longtime champion of the left whose monetary policy has been somewhat conservative during his first six years in office, said the country's oil profits should be spent revamping Brazil's educational system, particularly for the country's vast poor populace.

A former union leader, Lula said in September that Brazil's recent oil fortunes would help Brazil wipe out endemic poverty once and for all, a bold claim considering the South American country has one of the world's largest economic divides been the haves and have-nots.

Lula warned that the money must not be spent on "silly things," a direct reference to the recent frenzy of discussion among lawmakers in Brasilia on how to spend Brazil's future oil fortunes. Among the recently proposed expenditures is a fleet of nuclear submarines.

With full-scale production years away, talk of costly warships and the pricey revamping of an antiquated educational system is premature, analysts warn.

"All of the findings so far are probable. … They aren't proven yet," Jorge Pinon, energy fellow at the Center for Hemispheric Policy at the University of Miami, told United Press International.

Along with uncertainty about just how much oil lies beneath the Atlantic off Brazil is the difficulty in retrieving it from beneath thousands of feet of water and salt deposits under the ocean floor.

While the pre-salt findings at the much heralded Tupi field -- believed to hold somewhere between 5 billion and 8 billion barrels -- went online for the first time last week, the post-salt reserves are far deeper and could prove extremely difficult to access.

Though state-run Brazilian energy firm Petrobras is a world leader in offshore oil drilling, extracting oil from extreme depths is a difficult and costly endeavor, said Pinon.

"It's not that Brazil doesn't have the technological know-how -- the industry as a whole doesn't have the experience," he said. "It's a new geological frontier."

Others contend that Brazil's wealth of experience in deepwater drilling will allow it to make good on its projected timetable for production to begin in Tupi.

"As one of the industry's premier deepwater players, Petrobras absolutely has the ability to profitably develop recent huge discoveries," said Michael Lewis, an analyst with PFC Energy.

Drilling difficulties aside, the current global economic climate could hamper production from starting in the near future.

Last week OPEC President Chakib Khelil noted the $100 billion price tag on drilling Brazil's offshore deposits and the problems Petrobras could face, considering the large amount of capital it would need to borrow and the worldwide credit freeze.

Hoping to forge ahead, Brazilian energy officials maintain they will have 11 offshore platforms operating in the Tupi oil field by 2017.