CAPITAL: Brasilia

MONETARY UNIT: Real

REFINING CAPACITY: 1.66 million b/cd

OIL PRODUCTION: 845,000 b/d

OIL RESERVES: 4.8 billion bbl

GAS RESERVES: 5.58 tcf

Brazil began operating under petroleum deregulation measures enacted in 1997. The law ended more than 4 decades of monopoly by Petroleo Brasileiro SA (Petrobras), which now must compete with domestic and international petroleum companies.

Petrobras is permitted to associate with any company, domestic or foreign, and, if it chooses, sell assets such as refineries, oil and gas wells, pipelines, vessels, and subsidiaries.

The deregulation law also called for full price deregulation of petroleum products within 3 years. In the interim, petroleum product prices were to continue to be controlled by the economy and mines and energy ministries.

The new law created a National Petroleum Agency (ANP) charged with issuing tenders, granting concessions for domestic and foreign companies, and monitoring the activities of the sector, including establishing rights to explore for and develop oil and gas in Brazil. ANP is headquartered in Rio de Janeiro.

Petrobras was not privatized, but all of its technical data were to be made available to competing companies. Competitors can set up subsidiaries in Brazil. ANP was to transfer information to other companies after they paid Petrobras for it.

The new law established that all producing oil and gas fields remain under Petrobras control, and the government retains control of the company. On acreage where Petrobras had made commercial discoveries of oil or gas or was investing in exploration, this work was to be continued for 3 years.

The new law also hiked to 10% from 5% royalties to be paid for concessions. Royalties paid to states and municipalities that host oil or gas production increased.

Upstream developments

Brazil set water depth records of various kinds in the Campos basin off Rio de Janeiro state, site of 70% of the country`s production.

Petrobras added to its string of deepwater records in the Campos basin. It installed a diverless, guidelineless (GLL) tree in a record 5,525 ft in Marlim Sul field. ABB Vetco Gray supplied the unit for the MLS-3D well. Officials were completing an agreement with Petrobras for development of horizontal trees for use in 8,200 ft of water.

Marlim Sul field development involved reserves of as much as 1.8 billion bbl of oil equivalent, 616 million bbl proved. Only 20% of the field lies in less than 1,200 m of water, and water depths range to 2,000 m.

The next field in line for development was Roncador, another likely supergiant discovered in 1996 in about 6,500 ft of water. It was expected to set another water depth record when an early production scheme started up in 1998.

Petrobras started up Barracuda and Caratinga oil fields, claiming two records for this tandem development: deepest water for an FPSO (840 m) and largest FPSO turret system (34 production lines).

Processing activity

Brazil was the source of more than half of the South America/Caribbean region`s 1997 increase in refinery crude capacity.

Updated information from the Cubatao refinery increased the crude number to 155,029 b/d. Other major Brazilian crude capacity gains were seen at the Canoas, Rio Grande do Sul (107,275 b/d of increase), the Mataripe, Bahia (118,971 b/d), and the Paulinia, Sao Paulo (31,278 b/d) refineries.

Brazil accounted for most of Latin America`s increase in ethylene capacity in 1997. Co. Petroquimica do Sul SA (Copesul) increased capacity at its Triunfo plant to 685,000 million tons/year from 600,000. And Petroquimica Uniao SA increased capacity at its Santo Andre plant to 460,000 tons/year from 360,000 tons/year.

Meanwhile, Petrobras and YPF of Argentina agreed to form a joint venture to market petroleum products in Brazil and Argentina.

Transportation

Construction began in 1997 of a large-diameter gas pipeline from Bolivia to southern Brazil population centers and other energy projects. Petrobras also had a major gas pipeline project on tap in the north.

The company was starting a $175 million, 500 km pipeline in Amazonas state to connect Urucu oil and gas field in the jungle west of Manaus to Puerto Velho in Rondonia, another northern state. Combined, the Urucu and Jurua gas fields have the country`s second largest gas reserves at 738 billion cu m. Construction of the line was to start early in 1998.

Petrobras let construction contracts in July for western sections comprising about two thirds of the length of the planned 1,900 km Bolivia-Sao Paolo segment.

A 618 km spur is planned from eastern Bolivia northeastward to a power plant fired by gas from Argentina`s YPF, to start up in Cuiaba, Brazil, probably in 1999.