Brazilian President Dilma Rousseff poses with workers of state-run oil giant Petrobras.
Credit: Vanderlei Almeida

HOUSTON, Texas — Brazil, a festive land of vast resources and seemingly great prospects, has had a lousy year. Many hope Monday's sale of its vast Libra offshore oil reserves will turn the tide.

So what's got the South American giant down? For one, corruption scandals have tarnished the country's high-flying elite. Even Eike Batista, only recently feted by the media as a cross between to John D. Rockefeller and Sean "Puffy" Combs, is bleeding billions, his empire near bankruptcy.

The economy, big enough to place Brazil at the head of the club of would-be superpowers known as BRICS (also including Russia, India, China and South Africa), has sputtered. After a decade of annual GDP growth in the 6 percent range, Brazil barely grew at all in 2012 and this year, too, looks grim — or at least a very un-BRICS-y 3 percent.

The late summer panic that the US Federal Reserve was about to start "tapering" its massive injections of dollars into the global economy — a groundless panic as it turned out — exposed the vulnerability of Brazil's currency to the kind of contagion that’s laid Latin American and Asian "Tigers" more than once.

Even victory carried a bitter aftertaste this year.

The Confederations Cup, a global soccer tournament Brazil hosted this summer, brought victory for the home team but also millions of protesters into the streets. They were angry that the national wealth is going to build sports stadiums — for that tournament, next year’s World Cup and the 2016 Olympics — rather than improving the hardscrabble life of the working poor.

"Has Brazil blown it?" the Economist asked in a probing special report last month. Brazil's government scoffed, but the country's reputation as an underachiever, "the land of boundless missed opportunities," is never far from the national id.

And so it’s with enormous anxiety that Brazil views the upcoming bidding round for global energy companies of its largest-ever oil discovery, the Libra tract located 4 miles below the Atlantic and hundreds of miles off the Brazilian coastline.

President Dilma Rousseff has staked much of her public spending plans on Libra revenues the government expects at $400 billion over 30 years, Reuters reported. New oil wealth could help Brazil improve education and health care, which were among the myriad demands of the million-person marches that swept the country in June.

Labor unions are uneasy, too, but for different reasons. Workers of Brazil's state oil company, Petrobras, went on strike Friday, demanding the suspension of Monday's auction because they say foreign companies shouldn't be involved.

With an estimated 8 billion to 12 billion barrels, the discovery of the Libra tract five years ago shifted the global energy balance toward the Western Hemisphere and turned Brazil from a bit player into a major oil power almost overnight.

GlobalPost in-depth: Brazil's crude awakening

The complexity of bringing oil to market safely from such underwater depths could cost $200 billion over the four-decade life of the Libra reserve, according to Brazil’s oil ministry. That led Petrobras to seek the best and the most ambitious foreign companies on Earth to help exploit the field.

The technological challenge notwithstanding, Exxon-Mobil, Chevron, BP, Shell and other major independents were set to line up along with a bevy of state-owned giants from China, India, Norway, Malaysia and other nations eager to bid on a slice of this bonanza.

But only about a quarter of the expected firms will actually turn out for the Oct. 21 bidding round.

As the rules solidified over the past year, it became clear that rough seas, skull-crushing depths and environmental dangers were only the start of the risks a potential partner would need to manage.

In fact, Brazil's reputation for corruption, a stifling bureaucracy, a relatively undertrained, undereducated workforce and local content laws that turn any foreign participant into a mere minority partner of Petrobras have shooed away most of the names the average American would recognize.

"Between the fact that too many officials are on the take there and the thicket of rules you'd run into if you won a bid, I'm not surprised so many big players passed," said a senior partner at a firm that’s advised companies on the Brazilian market. "Add the natural obstacles — weather, depth, etcetera — and you'll end up losing money if prices dip below $110 a barrel." He requested anonymity due to his clients’ continuing interests in the country.

Indeed, of the independent, publicly traded oil majors — the ones for whom operating at a profit is the point of the whole thing — only France's Total and Royal Dutch Shell remain in the bidding.

To be sure, the companies choosing not to take part have taken care not to denigrate the opportunity publicly. There are, after all, plenty of other opportunities in Brazil, including a newer find closer to shore in the Sergipe-Alagoas Basin of northwest Brazil that may be even larger than Libra.

But the bidding process structure, which leaves 75 percent of any oil in the hands of Petrobras and the Brazilian government, plus the daunting array of regulatory agencies involved in Brazil’s energy industry, and the country’s reputation for corruption risk all played a role in limiting interest.

Not that the field will go untapped. In the end, the opportunity to bid on such a huge field will find takers no matter what the financial risks. State oil companies like China's CNOOC or India's Oil and Natural Gas Corporation, Videsh, after all, are after more than profit: They want to make sure their resource-poor economies don't run out of energy.

So with or without Exxon-Mobil and its ilk, the bidding will precede with 11 companies, including the large Chinese, Indian, Anglo-Dutch and French firms as well as Statoil, the Norwegian state oil company, all of which paid the registration fee of just under $1 million.

That is far fewer than the 40 major companies Brazil’s oil ministry expected, and it probably means a lot less money for the tracts that are assigned out.

But then in Brazil, it's been that kind of year. And Carnival is always just around the corner.

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