Gauging China’s Role in Brazil’s Energy Sector

Chinese activity in Brazilian energy remains mostly concentrated in the oil sector, according to participants at the Inter-American Dialogue’s China-Brazil Energy Conference in Sao Paulo, Brazil. Organized with the generous support of the Alcoa Foundation, the May 20th session was co-hosted by the China-Brazil Business Council and the Federacao das Industrias do Estado de Sao Paulo (FIESP).

Presentations by a diverse group of analysts from China, Brazil and the United States yielded several key insights into the evolving bilateral energy relationship:

• Chinese firms in Brazil’s clean energy industry remain cautious. Local content rules and land acquisition challenges have reduced investment in wind power and bioenergy. Chinese companies are actively studying the solar sector in anticipation of soon-to-be announced content rules.

• China has provided a total of $16.5 billion in financing and investment within Brazil’s oil sector over the past four years. Chinese firms also maintain a 10 percent stake in the Petrobras-run consortium in the pre-sal’s Libra fields. Despite clear evidence of cooperation, however, Chinese oil firms have also be relatively slow to engage Brazil. Chinese oil firm Sinopec’s investments have focused primarily on engineering services, for example, in an effort to study the Brazilian market and assess possibilities for future oil-related engagement.

• China and Brazil are unlikely to agree upon additional oil-backed lending in the coming years. Petrobras, after all, is not in a position to take on additional debt. The Chinese state’s priorities have also shifted in recent years from a nearly exclusive focus on meeting domestic demand to greater consideration of low-carbon options.

All participants agreed that enormous opportunities exist for future China-Brazil energy cooperation, but that bilateral agreements must be strengthened in order to pursue additional opportunities for investment and financing. Additional information and presentations from the conference can be found on the Inter-American Dialogue’s website.