The Brazilian Hydrocarbon Dilemma: Did Brazil Hit the Big Ticket Too Late?

Abstract

Hydrocarbon producers are often portrayed as the “losers” in a transition to renewable sources. The losers are those countries that remain trapped in the production of oil and gas, while those that are currently net energy importers may occupy a more comfortable position in a clean energy future. But can the case of a country with a clean energy matrix that has recently found a large amount of hydrocarbon resources be labeled as a loser in the energy transition game? After decades of efforts to develop its oil industry, Brazil is becoming an oil-export powerhouse due to the discovery of huge offshore resources in the ultradeep waters off its southeast coast known as the Pré-salt. Unfortunately (or not), this discovery has come at a time of major changes, in which oil-producing countries and companies may be affected by a global transition to renewable energy. The expected oil revenues may not have the value they had in the past and end up becoming a burden: stranded assets may arise from the uncertain timing of energy transition to renewables, increasing the need for energy planning and policies. This chapter will examine if and how the discovery of Pré-sal has affected the energy transition to renewables in Brazil. After recounting the Brazilian experience with carbon and renewable sources, we will look at how petroleum has become one of the three main products exported by the country in the context of internal and global discussions of the paths to an energy transition.