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Brazil, China have energy options: Expert

 

Even if the recent drop in oil prices makes pre-salt oil exploration in Brazil unviable, the country offers China other energy alternatives for investment, according to an expert on Brazil-China relations.

Severino Cabral, head of the Brazilian Institute of China and Asia Pacific Studies, told China Daily that if oil prices stabilize at about $60 to $70 a barrel, both pre-salt exploration and shale-oil exploration would become viable.

Cabral stressed that if oil becomes too cheap, renewable energy sources will become too expensive, and if oil prices increase, those sources will become more attractive.

"Renewable sources are only taken into consideration because oil and other fossil fuels got too expensive," he said. "If oil prices remain in the $60 to $70 level, it is inevitable that countries will invest in it."

In addition to pre-salt oil, Brazil also produces regular oil. So, while current prices are still convenient for pre-salt oil exploration, the country will still have the chance to invest on less expensive regular oil production if prices fall to levels which make pre-salt exploration unviable, according to Cabral.

In addition, he said Brazil also can explore other energy sources, especially renewable ones, such as ethanol fuel, solar power and wind power. Brazil also has a high potential for hydroelectric power, which supplies most of the country's energy.

For China, Brazil's energy versatility is an advantage, Cabral said. China is a great consumer of energy and can invest in many power sources in Brazil if oil prices make intended pre-salt investments not as profitable, he said.

"Brazil has a huge provision of natural resources, and is therefore a natural and strategic partner of China," he said.

Cabral believes that if oil prices fall too much, which he finds unlikely, and producers place their bets on cheap oil, investments in the more expensive pre-salt oil will get harder. But for Brazil, there is a simple solution, he said.

"We can place our bets in ethanol and biofuels. We can produce that in large scale for export," Cabral said. "Brazil is a country with a lot of natural resources; it takes investments to make them a favorable position in the international market."

Cabral said Brazil can seek alternatives if prices continue to fall, and China can be a great partner in that aspect.

"We cannot forget Brazil is a great commodities producer in both the energy and food fields. And China is the largest consumer of those products."

In the oil field, other opportunities for Chinese companies are opening with state-controlled oil and gas giant Petrobras seeking partners abroad, after the company had to suspend many of its local suppliers due to involvement in a large corruption scheme investigated by Brazilian authorities. Chinese companies can either seek to contract with Petrobras directly or join local companies in a partnership which benefits both sides, Cabral said.

"It is part of the Chinese way to present themselves in an association with local companies, in a win-win concept," he said.

No matter what industrial field sector China chooses to invest in Brazil, the two countries can grow together, Cabral believes.

"China will keep on being the locomotive of global growth, and Brazil must adjust to be part of this development," he said. "This is the great challenge, to adjust the country's finances for a more accelerated growth."

China is interested in boosting its partnership with Brazil, which represents an advantage to both countries, according to Cabral. Brazil still lacks some boldness to find out in which areas trade and relations can be strengthened, but that can be remedied, he said.

"We have a window of opportunity which is widening, but it can also start closing. We have some four or five decisive years ahead to take advantage of this opportunity," he said. "If Brazil can explore that opportunity well, it will be able navigate the sea of China, so to speak."

Source: By BRUNA GAMA in Rio de Janeiro For China Daily (China Daily Latin America)