Brazil is pumped up over offshore oil field

RIO DE JANEIRO — Exploratory oil wells drilled off Brazil's coastline indicate the presence of a vast pool of crude that could propel this nation into the top tier of world energy producers.

The oil field highlighted last week by state-controlled oil company Petrobras lies in "ultra-deep" waters beneath an unstable layer of hot salt, presenting technological challenges that are sure to be ultra-high cost. The find has sparked a fierce debate about whether Brazil should stake hundreds of billions of dollars on a risky field amid market uncertainty and pressing social needs.

Already, Brazilians are bickering over how the revenue from the field called Pre-salt should be spent, years before the first barrel is pumped, economist Edmar Bacha said. Suggestions include improving education and building a nuclear-powered navy -- and even wiping out poverty.

But foreign oil companies, whose investments helped make the recent discoveries possible, have been spooked by the Brazilian government's threat to shut them out of future projects.

This month, the government may announce the formation of a national oil company that could own 100% of the deep-water reserves.

Expectations of such a development have caused a sell-off in shares of Petrobras, which has grown into the world's fourth-largest oil company in market value on the strength of Brazil's rising energy output over the last decade.

The oil field's prospects are dramatic.

Results from test wells drilled by Petrobras and two partners in the so-called Iara block in waters 150 miles south of here indicated the presence of as much as 4 billion barrels of crude, officials said Sept. 10.

Combining Iara with as many as 8 billion barrels estimated to be in the adjacent Tupi block could boost Brazil's proven reserves of 15 billion barrels of crude by 80%.

Brazil is abuzz with indications that Iara and Tupi are merely parts of a much larger, New Jersey-size deep-water oil field. It's been dubbed Pre-salt in reference to the mile-thick layer of salt between the ocean floor and the oil.

The preliminary tests are auspicious enough that President Luiz Inacio Lula da Silva touted the undersea wealth as enough to turn Brazil into a "nation of engineers," a reference to his belief that oil will finance a development boom.

"It could definitely change the face of the country," said Paulo Levy, an economist with IPEA, a Rio de Janeiro think tank.