Brazil’s Mines and Energy Sector | Minister of Mines and Energy

Interview with Edison Lobao, Minister of Mines and Energy of Brazil

Brazil is one of the main energy exporters in the world and is expected to produce 5.5 million barrels a day in the next decade. What’s the main challenge for the Brazilian oil and gas industry?

Our challenge is related to our ability to invest the resources we have to build all the platforms, drilling rigs of petroleum and ships, as well as an entire infrastructure needed to produce, transport and process oil in Brazil. At the moment, we are building four new refineries – two of them are of big proportions. The refinery being built in Maranhao State, for instance, will be the fifth or sixth biggest in the world. When extracting “Pre Sal” oil in large amounts, we will have our infrastructure in place.

The fact that Brazil is one of the main oil producers in the world calls for more responsibilities before the international community. What will Brazil’s approach be in international matters?

Brazil is not a country member of OPEC (Organization of the Petroleum Exporting Countries), but it has often been invited to attend its meetings. I have attended five or six of these meetings. We are completely aware of this international organization’s operations, but we are not one of its members yet, because we are studying our involvement there and also in the National Agency of Energy. However, our procedures are compatible with the international standards for the oil and energy sectors.

What’s the role for Brazil to play?

To be an important partner with the world’s biggest economies. Brazil has reached the 10th position in consumption of oil and its derivatives, being one of the top international players in this market, always following rigid rules applied in this sector.

According to you, Brazil will invest around $214 million to build hydro, solar and wind-driven projects, which should increase its energy consumption by an annual rate of 5.1% in the next decade. How much room is there for international investments? How is your department approach to the financing of mega projects?

At the moment, no other country in the world has invested so many resources in the energy field as Brazil. We have the largest purchases of drilling rigs, petroleum platforms, ships and pipes, among other items, besides our investments in infrastructure. The international capital is very welcome and we have laws applicable to foreign investments. There is no restriction to international capital, except for the mandatory national investments to build platforms, ships and so forth. International companies settling in Brazil are considered Brazilian companies and are thus subject to the same rules as national companies.

We are focusing our efforts on wind energy projects. I too believe Brazil has expanded its presence in this field as no other country has. We don’t have great amounts of energy yet, but there’s been quite an improvement with the establishment of exclusive auctions for wind power, for instance. Nowadays, because we have improved in machinery production and count on favorable, abundant currents of air, our wind energy is one of the cheapest in the world.

On the other hand, what are some challenges that could discourage investors?

There are great advantages in investing in Brazil. Our regulations to draw foreign capital are among the best in the world. BNDES (Brazilian Development Bank) has strongly contributed to the presence of international companies and to most activities they engage here. For example, generation, transmission and distribution of energy are financed by BNDES at competitive interest rates.

But Brazil has only advantages?

Yes, if we are talking about international investments. Maybe some challenges have to do with the own competency of the investors and their observance of Brazilian guidelines. We don’t want to have amateurs working as if they were big entrepreneurs. They have to go through legitimate processes such as auctions and public tenders, competing with other Brazilians and foreigners.

What are the opportunities in the mining sector in Brazil?

In the sixties, we came up with a mining code that aimed to attract national and foreign capital to support mining exploration in Brazil. We provided benefits for that to take place. That code is outdated and does not represent Brazilian aspirations anymore. In the past, for instance, we could grant charters for indefinite mineral exploration. Now, the new code allows for foreign investments as long as those international companies abide by updated laws and recognize our national goals. This new code is under examination, but it will soon be sent for approval by the National Congress.

I’d like to emphasize that foreign capital is very welcome here and that investors will receive our support. An international company that wants to stay in Bahia, Maranhao or Rio de Janeiro and build platforms can do so, as long as they always take into account the national context.

Brazil is also the biggest exporter of iron ore in the world. Our mineral is considered to be of highest quality. We have the fourth or fifth biggest uranium reserve of the planet.

Ethanol and sugar production are linked to potential negative impact on the environment. How is Brazil prepared to harmonize its energy policies with sustainable development?

We have an extremely rigorous legislation as to the environment. We have two institutes besides the Ministry of Environment (Ibama, Brazilian Institute of Environment and Renewable Natural Resources, and Chico Mendes Institute), which are responsible for energy development issues in our country. While producing ethanol, we are benefiting the whole world by fighting pollution. Ethanol is a very low-level pollutant that releases an insignificant amount of pollution. In the past, we had to deal with deforestation of huge areas to plant sugar cane. We burned the bagasse, throwing it into the rivers, killing the fish and polluting the air. But it’s not like that anymore. Now, the burned bagasse is used as a powerful fertilizer in sugar cane plantations, not to mention that it produces electrical energy. And we take precautions in oil exploration as the most advanced nations do.

In your opinion, what could be a reasonable long-term goal for the sector of energy?

In the next five years, Brazil has to produce 50% more energy than today. We have a long way to go in a very short time. We have to act fast, but very carefully towards preserving the environment. We cannot compromise that. Sometimes, critics say that we are producing ethanol and biodiesel at the cost of the ecosystem. There is no trade-off in such matters. We use only 1% or 2% of all our productive land to cultivate sugar cane and oilseeds for biodiesel. We still have 90 million hectares of land for agriculture purposes.

No one in the world can teach us how to better preserve our environment. We pollute less by producing energy than by managing our cattle farming.

Brazil deserves to be complimented for setting the example in environmental preservation.