Brazil Update: Energy at Home and Abroad

Hemispheric energy security requires unprecedented cooperation.  From market access, efficiency, technology transfer and research to infrastructure and investment, a diverse array of government and private sector actors will need to come together to see through policy changes. For this, Brazil may offer an important example.  Its biofuel industry, which already supplies the entire domestic market, is expanding globally and may help to advance energy security and promote sustainable development across the region.

 

Domestically, Brazil derives its energy from a variety of sources. Hydropower still accounts for more than 80 percent of all energy generated, totaling 258,400 megawatts (MW) per year. However, only 28 percent of electric energy producing capacity has been exploited. To keep up with economic growth of about 4.5 to 5 percent per year, in addition to increased demand over the next few years, annual electric energy production should expand by 2,000 to 3,000 megawatts.

 

But the energy sector is facing numerous challenges, including delays in approving environmental licenses for hydropower projects and uncertainty about natural gas supplies. Nevertheless, the government is undertaking two large-scale hydroelectric dam projects in the MadeiraRiver. Located in the heart of the Amazon, both complexes would significantly boost Brazil’s energy production. If construction starts now, the two projects—Santo Antonio (3,150 MW) and Jirau (3,300 MW)—could generate approximately 6,400 megawatts per year by 2012. On the nuclear front, the government recently approved construction of Angra III, a third plant that would raise nuclear capacity to 3,000 MW per year.

 

According to the Ministry of Mines and Energy, Brazil will remain self-sufficient in oil through 2030 but will need to build seven new oil refineries in the next 25 years to meet growing demand. For long-term plans and projections to become reality, the energy sector must investment approximately $32 billion per year.  Of that, 49 percent is planned for oil projects, 35 percent for large hydroelectric projects and 12 percent for natural gas. These forecasts are based on an average global economic growth rate of 3 percent through 2030, with Brazil growing at around 4 percent.

 

The potential for increased rural economic development and trade opportunities have been some of the key drivers for regional biofuels development. Across the hemisphere, governments are either expanding or launching ethanol initiatives. Brazil, a recognized global leader, is at the forefront of these efforts.  Last year, Brazil exported 3.4 billion liters of ethanol, with half of these shipments going straight to U.S. ports and another 486 million liters entering the U.S. through Caribbean Basin Initiative countries.

 

In August, President Luiz Inácio Lula da Silva(Lula) traveled to Honduras, Nicaragua, Jamaica, and Panama to promote the use and development of biofuels.  All four countries are importers of oil and producers of sugarcane and other products used to make biofuels—in total, Central America produces more than 3.5 million tons of sugar per year.

While in Jamaica, President Lula and Prime Minister Portia Simpson Miller agreed to continue cooperating in ethanol production as well as to encourage oil and gas exploration partnerships off the Jamaican coast.  In Panama, the two countries signed a biofuels memorandum of understanding. A new bilateral task force will promote further ethanol and bio-diesel production and consumption through increased technology transfers and other such measures. President Lula also highlighted the importance of ethanol in Honduras and signed a biofuels technical cooperation declaration with President Zelaya.  However, Nicaragua was a different story. None of the 12 or so cooperation agreements signed between the two countries focused on ethanol, but Nicaraguan President Daniel Ortega did react warmly to the possibility of Brazilian support for its struggling electricity sector.

 

In August, Brazil and Mexico agreed to strengthen bilateral energy cooperation. While in Mexico, Presidents Lula and Felipe Calderón signed a bilateral cooperation agreement focusing on energy projects such as the development of technology to access heavy crude and carbon deposits in deep water. Various projects were also on the agenda in the areas of refining, petrochemicals, liquefied natural gas, energy efficiency, renewables, and energy trade.

 

The strategic alliance between Brazil’s Petrobras and Mexico’s Pemex was also renewed.  While Petrobras is a leading expert in deep and ultra-deepwater oil drilling—technology that Mexico lacks—Pemex is an expert in deepwater gas exploration.  Both presidents also discussed the possibility of signing future accords to promote ethanol production— mainly from sugar cane and other oil-bearing seeds—and biofuel technology exchange.  They also agreed to create a large-scale ethanol industry in Mexico, expand export markets especially to the U.S. and EU, develop appropriate infrastructure, and enhance agricultural cooperation.