WikiLeaks | The “This Oil Is Ours” Factor

Natalia Viana. of Carta Capital — who has contributed Portuguese-language reporting to the WikiLeaks site on matters of interest to the Brazilian public — has mounted a WikiLeaks blog with the imprimatur of the weekly newsmagazine.

“The oil is ours!” has been a patriotic reallying cry since the days of Getúlio Vargas — who founded the state-owned Petrobras — and the debate over the model for the exploration of the pre-salt finds off the Brazilian coast is a good example of what the Clifford Sobels of the world contemptuously deride as Brazilian “paranoia.”

I translate.

“Will the oil industry succeed in lobbying against the pre-salt bill?” This is the title of a lengthy telegram sent by the U.S. consulate in Rio de Janeiro to Washington on December 2, 2009..

This and a further five telegrams divulged by  WikiLeaks show how closely the U.S. diplomatic mission to Brazil has paid attention to rumors about the drafting on rules on pre-salt exploration  – and how hard they lobby for big oil. .

The documents reveal how unhappy oil companies are with the pre-salt legislation approved by the Congress  – and especially with the fact that  Petrobras will serve as the sole operator  – and how hard they have worked to scuttle the bill in the Senate. .

Some seem to have accomodated themselves to the facts on the ground, if GE’s acquisition of Wellstream — and its opening of a $100 million research center in Rio– is any indication.

“They are the professionals and we are the amateurs,” was the remark attributed to  Patrícia Padral, director of Chevron no Brasil, regarding the law passed by the Brazilian lower house . According to Padral, PSDB presidential candidate José Serra promised to alter the rules if elected. .

Howls go up. Expect the accuracy of the report to be questioned.

Not long after the first proposals for exploration emerged, the  Rio de Janeiro consulate sent a confidential telegram summarizing the responses of oil company executives.

Dated August 27, 2009, it shows that Petrobras’ role as sole operate was viewed as “anathema” by the industry.

The fact is that the Brazilian government changed the rules for the pre-salt fields. Exploration companies will not, as they do in other places, receive a concession to operate the fields, becoming “owners” of the oil discovered for a fixed period. In the pre-salt files, they will have to follow a revenue sharing model, handing over at least 30% to the federal government. And Petrobras will be the sole operator of all oil fields..

Exxon Mobil international affairs director, Carla Lacerda said that  Petrobras would control all purchases of equipment and technology and all hiring, possibly to the detriment of American contractors.

Chevron government affairs director Patrícia Padral goes further,,accusing the government of making “political use” of the model.

They plan to use the money on social programs, this is true.

Another heavily criticized move was the creation of  PetroSal to manage the new reserves.

Fernando José Cunha, Petrobras chief executive for Africa, Asia and Eurasia, goes so far as to tell the economic attaché that the new company would end up sapping Petrobrás resources. The only possible rationale for the new company is politicial : “The PMDB needs a company of its own to run.”

The party, Brazil’s largest, does have that reputation to live down.

Even with all the complaining, the telegram makes it clear that American firms want to stay in Brazil and benefit from pre-salt exploration.

In Exxon Mobil’s view, the Brazilian market is especially attractive given the increasing scarcity of access to resources elsewhere in the world..

“The rules can always be changed later,” Patrícia Padral of  Chevron reportedly said..

The same attitude was reportedly taken by  PSDB presidential candidate José Serra, segundo, according to the December 2, 2009 telegram.

Entitled “Will the oil sector be able to stop the pre-salt law?” it details the industry’s lobbying strategy..

One of the major concerns of the Americans was that the model might favor the Chinese competition, given that  China’s state oil company could offer higher returns to the Brazilian government.

Patrícia Padral is said to have complained of apathy on the part of the opposition: “The PSDB has not even shown up for this debate.”

It is a highly popular measure, after all.

According to Padral, José Serra was opposed to the law but demonstrated no “sense of urgency.” “Let these guys (from the  PT) do what they want. The bid solicitations will never come off, and then we will be able to show everyone that the old model actually worked … and we will change everything back,” Serra reportedly said..

The best thing, according to  Padral, was to resign oneself to the new rules. “They are the pros and we are the amateurs,” she reportedly said regardomg presidential advisor Marco Aurelio Garcia  and communications secretary  Franklin Martins, the main powers behind the legislation.

That Garcia is a smart guy.

“With the industry resigned to passage of the bill in the lower house, the strategy now is to recruit new partners to work on the Senate, trying to pass substantial amendments and trying to delay the outcome until after the October elections,” the diplomatic cable concluded..

Among the partners to be recruited were OGX, owned by Eike Batista;  FIESP, the São Paulo industrial federation; and the National Confederation of Industries (CNI).

Paulo Skaf of FIESP ran for governor on the Socialist ticket. Imagine!

“Lacerda, from Exxon, said the industry plans to play man-to-man defense in the Senate, but that in any event, Exxon would mount its own lobbying efforts as well.”

Chevron said that future ambassador Thomas Shannon might wield considerable influence in the debate, and pressured for his confirmation..

“Oil companies are going to have to be careful,”the cable concludes. “A number of contacts inside the Brazilian congress feel that by talking openly about the matter, foreign oil companies run the risk of galvanizing nationalist sentiment and hurting their own cause.”

That would have been my advice, too. Every time Lula gets his picture taken in orange overalls and a hard hat, turning some new ceremonial spigot from which economic opportunity will soon come gushing forth, Joe Brazilian is mighty impressed.

Maybe I should get some nice suits made and turn consultant.