A Tale of Two Countries

Macaé, Brazil – August 2010

Work sometimes takes me to obscure places around our planet. This relatively unknown coastal town is about three hours by harrowing taxi ride from the Rio de Janeiro airport. It owes its recent good fortune to the discovery of massive deepwater oil fields off its coast. For those of you familiar with the oilfield in Southern Louisiana, Macaé is Brazil’s Houma.

As I write this, the stark contrasts between the two governments’ policies are manifest and have strong effects on the populations. One government is nominally socialist, the other traditionally a free market democracy. One is restrictive, the other less so. One is hostile to business, especially the oil business, while the other is not. One is supportive of offshore drilling, the other is not. The stunning part is that it is the current O’administration that is the restrictive and hostile one, while the Lulu administration in Brazil is the supportive one.

Macaé has beautiful beaches, but the locals point to beaches 30 clicks away as being better. It has a few hotels, a few local restaurants, an old McDonalds…and a full complement of oilfield service businesses. The people are friendly, well-educated, hard-working, and hungry to learn new skills. At least two of the major offshore drilling contractors have major offices here, and all the service companies are amply represented. The hotels are virtually full with staff from Halliburton, Baker, Transocean, Diamond, Schlumberger, and others. Typical of boom-towns, it is said that the cost of living is higher here than anywhere in Brazil. Talk among American expats sometimes refers to them being “Gulf of Mexico exiles” since work in the Gulf remains inexcusably halted by our own government, for no better reason than to satisfy what is now being called the “professional left”.

The left-leaning Brazilian government is, however, supportive of the energy business in general and the deepwater oilfield in particular. Petrobras, the partially state-owned-and-run oil giant, is roughly the size of BP but is growing, rather than being forced by the government to sell off properties to fund the infamous White House shakedown. In addition to dozens of deepwater drilling and production facilities already working here, a colleague informs that some twenty six NEW deepwater drilling rigs are on order—designated for Brazilian waters in the years to come.

Except for the native Portuguese language, one could be forgiven for thinking Macaé had most of the characteristics of a Gulf Coast oil services town from just four months ago.

Meanwhile, in the USA, with only two rigs now drilling in deepwater, our own government has complete control and their boot on the neck of the private companies involved. The standard operating procedure is called “waiting on orders”—WOO in oilfield shorthand. WOO is a bad thing. For-profit companies don’t like seeing “WOO” on daily “morning reports” of the prior day’s activities. It denotes a distinct lack of planning, a logistical nightmare, profound indecision by bosses, and in general wasted time and efforts no competent manager would be proud of. When time costs upwards of $1 million US per day, time IS money. For BP, the costs are far higher, as high as $40 million per day, as thousands of boats and hundreds of aircraft are involved. WOO seems to be the only thing Government Oil is comfortable doing. Months after they staged a coup d'état of the operation, they demonstrate incompetence almost daily.

Though the relief wells were quickly started by BP at the onset of the disaster, and made tremendous progress up until the O’government took over, they have been WOO or doing meaningless make-work almost completely since the takeover. At this writing meaningful work is again suspended WOO. (Relief wells are the “silver bullets” of well control operations—only one well in history has failed to be killed by relief wells, and it was not blowing out oil.) Whether in the words of the High Command due to an “overabundance of caution”, ineptitude, government scientists with zero deepwater experience, the government’s takeover has caused the effort to quickly bloat into the most expensive wells EVER in the history of the oil patch. And the “end game” is not to eventually produce useful and needed oil from them, but rather, to effectively declare them a complete waste by filling them with cement. To put it in comparison the estimated costs are around $30 billion, give or take. Sans Government Oil, that $30 billion could translate into at least 300 more productive deepwater wells, producing upwards of 15,000,000 barrels of needed and useful oil per day. We only import around 10,000,000 barrels per day. Do the math.

So take your choice. A government bent on destroying the American oil industry, or one that is friendly to even foreign (including American) oil interests. Oh, did I mention that Brazil is 100% energy self-sufficient, has a renewable energy program that dwarfs ours, and the country has yet to see the effects of a recession?

They even got the Olympics that O’ wanted so badly for his Chicago cronies.