A Conversation on China-Brazil Energy Relations

Petrobras / Agência Brasil / CC BY 3.0 BR

On May 20, 2014 the Dialogue’s China and Energy programs, the China-Brazil Business Council, and the Federacao das Industrias do Estado de Sao Paulo (FIESP) jointly hosted a meeting on China-Brazil energy cooperation. Organized with the generous support of the Alcoa foundation and held in conjunction with FIESP’s annual infrastructure conference in Sao Paulo, the event featured analysis from five energy experts on China’s involvement in Brazil’s oil, renewables and electricity transmission industries.

Comparatively high rates of energy use in China and Brazil have led to investment in many forms of energy, including renewables. But as Camila Ramos, the managing director at CELA - Clean Energy Latin America, indicated during the event, Chinese investment in Brazil’s clean energy industry has been relatively limited. Local content rules have reduced investment in wind power, according Ramos and Mauricio Aredes, a professor in the department of Electrical Engineering in the Federal University of Rio de Janeiro. Land acquisition challenges have similarly limited Chinese investment thus far in bioenergy. Chinese companies are actively studying the solar sector in anticipation of soon-to-be announced content rules.

China has invested a total of $16.5 billion in Brazil’s oil sector over the past four years. Chinese firms also maintain a10 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, according to Edmar Almeida, a professor at the Institute of Economic at the Federal University of Rio de Janeiro. Firms continue to test the waters not only in the oil industry, but in a wide variety of sectors. 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.

Almeida added that China’s model of oil-related engagement has also evolved somewhat in recent years. Recent activity has focused on acquisition of considerable stakes in major oil firms already operating in Brazil. This approach enables Chinese firms to better access the Brazilian market. As has been the case in Brazil agricultural and mining sectors, Chinese firms are also looking to insert themselves into local production chains. They are seeking, for example, to invest not only in equity oil, but also in various aspects of oil production.

Almeida also noted that 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. Niu Haibin of the Shanghai Institutes of International Studies added that 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 there is nonetheless enormous opportunity in terms of future China-Brazil energy cooperation. Bilateral agreements must be strengthened, however, in order to pursue additional opportunities for investment and financing.


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