The Chevron Oil Spill

Reuters published an interesting article yesterday about a recent 2,400 barrel Brazilian oil spill (by contained) caused by the US company Chevron. For those of us that tend to be skeptical that it will be so easy for Brazil to obtain "developed-country status" within the next two decades, it supplies some interesting information. While the proximate cause was errors in Chevron's calculations of pressure and rock strength, the article argues that the ultimate cause is the vast difficulty involved in tapping subsalt oil supplies.

Though the Brazilian government has tightened restrictions following the 2010 BP disaster in the Gulf of Mexico, the fact that Brazil is counting so heavily on subsalt oil makes it likely that risky exploration will continue. Brazil has been making good progress since the end of hyper-inflation in the mid 1990s, but the country's political culture makes it difficult to take on some of its most glaring problems, such as education and health. Recent oil discoveries represented a way to take them on without making large sacrifices elsewhere, and the allure of billions to spend on social issues without cutting out other spending on voters is more than any government can resist. So don't expect Brazil to willingly slow down it's own oil development, given the huge payoff leaders can expect.

At the same time, even when moving forward as fast as possible, Brazil can expect to encounter further difficulties. As quoted in the article:

"This spill shows that there is much that we still don't know," said Segen Estefan, a professor of undersea engineering at the Federal University of Rio de Janeiro.

"We have to recognize that we really don't fully understand the risks and need to do much more to not only make drilling safer but find ways to clean up spills. As you go deeper everything gets more difficult."

With things getting further behind schedule and many becoming impatient with the delay in payoff after the 2009 announcements of oil, it seems likely that the pressure to deliver results soon will risk bigger disasters.