Free Markets, Free People

$2 billion US dollars to Brazil, but the oil will go to China

Remember this?

The U.S. is going to lend billions of dollars to Brazil’s state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil’s Tupi oil field in the Santos Basin near Rio de Janeiro. Brazil’s planning minister confirmed that White House National Security Adviser James Jones met this month with Brazilian officials to talk about the loan.

The U.S. Export-Import Bank tells us it has issued a "preliminary commitment" letter to Petrobras in the amount of $2 billion and has discussed with Brazil the possibility of increasing that amount. Ex-I’m Bank says it has not decided whether the money will come in the form of a direct loan or loan guarantees. Either way, this corporate foreign aid may strike some readers as odd, given that the U.S. Treasury seems desperate for cash and Petrobras is one of the largest corporations in the Americas.

And  this?

“We want to work with you. We want to help with technology and support to develop these oil reserves safely, and, when you’re ready to start selling, we want to be one of your best customers.”

Mr. Obama was saying that while he was drastically slowing down leasing and permitting in the US and whining about “subsides” to US oil corporations.  We apparently can subsidize government controlled oil companies in foreign countries, but not here (and I’m not arguing for subsidies here – just pointing out the usual Obama contradiction – kind of like he’s against bailouts, except for Chrysler, GM, Solyndra, etc.)

Well, that little jump-start of ObamaDollars has indeed helped “develop these oil reserves”.  And the beneficiary?

Off the coast of Rio de Janeiro — below a mile of water and two miles of shifting rock, sand and salt — is an ultradeep sea of oil that could turn Brazil into the world’s fourth-largest oil producer, behind Russia, Saudi Arabia and the United States.

The country’s state-controlled oil company, Petrobras, expects to pump 4.9 million barrels a day from the country’s oil fields by 2020, with 40 percent of that coming from the seabed. One and a half million barrels will be bound for export markets.

The United States wants it, but China is getting it.

Less than a month after President Obama visited Brazil in March to make a pitch for oil, Brazilian President Dilma Rousseff was off to Beijing to sign oil contracts with two huge state-owned Chinese companies.

Well done, Mr. Obama.

[HT: Red Country]


Twitter: @McQandO

15 Responses to $2 billion US dollars to Brazil, but the oil will go to China

  • What’s up with Brazil?

    They were awarded the contract for the new Air Force light support plane, too…while under a cloud here for their business practices.

    Of course, Soros could not be connected to these people. Naw…

    • @Ragspierre Forbes had an article a while back about all this – interestingly the contention of the writer was this is all kind of independent. Which I bought, until I went to look at how the EI Bank works. And of course the writer didn’t mention what
      “Brazil’s planning minister confirmed that White House National Security Adviser James Jones met this month with Brazilian officials to talk about the loan.” would be doing meeting with the WH NS Adviser if it’s all so independent as the writer was trying to portray it.

      “It’s the Brazilian government, not SOROS”, etc.

      Now the argument was this is all intended to cause Brazil to buy American oil expertise by way of equipment and personnel, that they wouldn’t otherwise buy?

      • @looker Coupla thangs…

        1. America dominates the drilling technology world; Brazil would be a buyer in all likelihood.

        2. So, isn’t that a subsidy for big American oil…?

        • @Ragspierre So, we’re saying that George W. Bush is profiting, again. Geeze, this is just another demonstration of that french ‘plus change’ thing ain’t it.

        • @Ragspierre @looker Brazil are real hard on foreign technology being used there. In many cases they will effectively force companies to open facilities in Brazil if they want to do business there, getting tools in is real tricky otherwise.

          The way I figure it is Obama doesn’t give two shits about the petro industry, at homr or abroad, as long as he can use it as a football. Sugardaddy Soros paid for Obama’s rise to glory and likely is calling a favor for a Brazilian job, or perhaps the loan is greasing the access of an American company to some Brazilian work and buying off some support for O in the industry. Whatever the nasty details I really don’t expect Obama to be putting the interest of the treasury ahead of his pals this year.

        • @DocD @looker Yep. Brazil’s govt. has been in bed with Chavez, too, if I recall.

        • @Ragspierre @looker Brazil has one consistent policy… Brazil first, They’re self-sufficient in almost everything and do everything that Obama claims he wants. Maybe you should send him down there as an intern for a couple of years.

        • @DocD @Ragspierre “razil has one consistent policy… Brazil first”
          Shoot, what kind of crazy national policy is THAT?

        • @DocD @looker I’d be happy to send him down there as a prisoner…

  • There seems to be a real odd trail of stories of Soros and Petrobras. Even a few from Media Matters, which tells you there must be some sort of stench attached to all of it. Soros seems to bought big into Petrobras, but then sold off around the time of the moratorium, only to put a billions dollars or so right before the Ex-Imp Bank got involved.

  • Oil is (broadly) fungible, and no country is stupid enough to sign a deal that gives a customer sub-market prices.

    So my only qualm is that the State shouldn’t be funding this stuff anywhere, not that “we” aren’t getting the oil.

    If China buys every drop, that means they’ll be buying less of the other oil in the world – more supply means lower prices, ceteris paribus (and I don’t think we’re in a state, world-wise, such that there’s a lot of pent-up demand for slightly cheaper oil that will cause flat price response).

  • Yes, as others have commented, Oil is completely fungible. It does not matter where it is produced, or who buys it. All that matters is that if more oil is placed into the world economy, then that tends to depress the price for everyone.

  • Just to bring in this down to earth from the Glenn Beck stratosphere… The loan guarantee for Petrobras was offered for the exclusive purpose of borrowing to fund purchases of US goods and services (ie; US jobs). It was not offered for the purpose of extracting oil, it was not offered for the purpose of guaranteeing the US would be the ultimate customer of any or all oil extracted. As of March, 2011, under this loan guarantee, JP Morgan entered into a a medium-term credit guarantee facility with Petrobras for $308 million (so choose not to even contemplate the full $2b), and as of that time the loan was still not operative. The idea here is to make US exports more attractive by offering lower rates on loans used to purchase exclusively from US (at least to the extend of EX-IM loans). Granted, the fiction of this post is much more entertaining than the reality.

  • From Bloomberg News:

    “TransCanada Corp. may shorten the initial path for its rejected Keystone XL project, bringing oil from Montana’s Bakken Shale to refiners in the Gulf of Mexico and removing the need for federal approval. ‘There certainly is a potential opportunity to connect the Bakken to the Gulf Coast,’ Alex Pourbaix, TransCanada’s president of energy and oil pipelines, said in a telephone interview today. ‘That is obviously something we’ll be looking into over the next few weeks.’ TransCanada’s $7 billion Keystone XL proposal to bring crude from Canada’s oil sands to the Gulf was rejected yesterday by the Obama administration. The project required U.S. approval because it crossed the border with Canada. The company may seek that approval after it builds the segment from Montana to the Gulf, Pourbaix said.”