VZCZCXRO7681
RR RUEHRG
DE RUEHRI #0035/01 0571917
ZNR UUUUU ZZH
R 261917Z FEB 08
FM AMCONSUL RIO DE JANEIRO
TO RUEHC/SECSTATE WASHDC 4358
INFO RUEHBR/AMEMBASSY BRASILIA 0716
RUEHSO/AMCONSUL SAO PAULO 5131
RUEHRG/AMCONSUL RECIFE 3409

UNCLAS SECTION 01 OF 02 RIO DE JANEIRO 000035 
 
SIPDIS 
 
SIPDIS 
 
NSC WASHDC 
USDOC WASHDC 
 
STATE FOR WHA/BSC, WHA/EPSC AND GREG MANUEL 
EB/ESC JAMES EIGHMIE 
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D 
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/DRAMBO 
 
E.O. 12958: N/A 
TAGS: ENRG EET PREL BR
SUBJECT: BRAZILIAN NATIONAL OIL AGENCY WELCOMES US PARTNERSHIPS, 
DISCUSSES NEXT STEPS IN SUSPENDED OIL ROUND 
 
¶1. Summary: Ambassador Sobel met with Haroldo Lima, Director General 
Florival Rodrigues de Carvalho, General Manager of Planning and 
Research, and Durval Barrros, General Manager of Institutional 
Communication of the National Oil Agency (ANP) on February 15, 2008. 
 They discussed potential synergies in the areas of biofuels, 
research and development, and the regulation of oil exploration and 
production.  Both parties agreed to use the upcoming American VIP 
visits as platforms to formalize partnerships in common areas of 
interest.  ANP's Lima also outlined steps being taken to resume the 
next round of oil licensing. 
 
BUILDING PARTNERSHIP THROUGH TECHNICAL EXCHANGES - ESPECIALLY ON 
BIOFUELS 
--------------------------------------------- -------- 
 
¶2. Ambassador Sobel highlighted the November 2007 USTDA-sponsored 
technical orientation visit by Brazilian ANP gas specialists to the 
United States to learn about Liquefied Natural Gas (LNG) regulations 
and licenses.  Given the similar challenges in pre-salt explorations 
between the Tupi Field and the Gulf of Mexico, Ambassador Sobel 
expressed his desire to see more technical exchanges. 
 
¶3. Lima agreed that U.S. and Brazilian regulatory agencies have much 
in common, and there is room for further understanding and growth on 
the GOB's part.  He also acknowledged problems with the regulatory 
aspects of oil, gas and biofuels.  The Ambassador highlighted an 
opportunity to go beyond talks and to develop substantive 
deliverables under the U.S.-Brazil Biofuels MOU.  He noted the new 
harmonized standard for biofuels as an important first step for 
creating new markets for biofuels exports globally. 
 
¶4. Ambassador Sobel raised his recent meeting with GE president for 
Latin America, who said the co-generation aspect of biomass is more 
interesting than the fuel itself.  Noting that the United States 
spends billions in loan guarantees to fund R&D projects to 
commercialize the next generation of biofuels, he asked if there 
were any Brazilian R&D projects that the U.S. could support.  He 
mentioned this could be the subject of an agreement signed by the 
Foreign Minister and the Secretary. 
 
¶5. Carvalho highlighted new studies on using sugarcane by-products 
and enzymes and the possible conversion of paper pulp into alcohol. 
Other studies are exploring the use of different raw materials from 
oil plants.  The U.S. is studying how to use micro-algae to develop 
biofuels.  Barrros added ANP specialized in regulating biofuels 
based on sugar cane, but that new studies were underway on how to 
use sugarcane by-products such as straw and gas to also generate 
ethanol and reduce waste.  He said that enzyme and cellulosic 
conversion processes were of high interest to ANP, and that these 
could be good areas of cooperation between Brazil and the United 
States. 
 
OIL LICENSING ROUNDS 
-------------------- 
 
¶7. With regard to oil regulation, Lima called the existing model 
evolving.  There are new fields being discovered, including in the 
pre-salt area with high potential and low exploratory risk.  He said 
the pre-salt formation is more than 800km long and up to 200km wide 
in ultra-deep waters. This area has similarities to the Gulf of 
Mexico and the North Sea. 
 
¶8. The Ambassador asked when the ninth round of oil licensing might 
be completed.  Lima explained that the ninth round of oil 
negotiations was abruptly halted one month before its conclusion 
when Petrobras discovered the Tupi oil field.  In a ministerial 
meeting chaired by President Lula, the GOB decided to remove 41 
blocks from the bidding process in order to examine next steps in 
regulating exploration and production given the size of the 
discovered field.  ANP requested help from the U.S. in creating a 
regulatory paradigm to develop concession contract models. 
 
¶9. Lima underlined the need for expediency in formulating 
regulations, given that the need to resume bidding for the 
unfinished eighth round that was partially suspended and the new, 
10th round, which could include the 41 blocks which were removed. 
He also emphasized that ANP was interested in learning about royalty 
payment collections in the United States, especially given the 
increase to 12-16 percent in collections from companies exploring 
for oil in the Gulf of Mexico.  Additional revenues would strengthen 
ANP as an agency and would be a key role in their administration of 
the future blocks up for auction in upcoming licensing rounds.  In 
 
RIO DE JAN 00000035  002 OF 002 
 
 
other words, ANP is looking to create a new E&P paradigm.  In this 
regard, US technical assistance would be much appreciated. 
 
¶10. Ambassador Sobel offered to help facilitate technical exchanges 
through either USTDA or directly through ANP's counterparts in the 
United States  (e.g. through the US Minerals and Management Service 
- MMS) to get experts to advise on oil and gas royalty concession 
concepts to maintain transparency in the oil field licensing 
process. The Ambassador reiterated the importance of a partnership, 
where both countries would learn from each other. 
 
¶11. Lima agreed that the United States and Brazil have common 
interests in the regulation of high-potential oil and gas basins 
that have low exploratory risk.  Although he acknowledged that the 
GOB urgently needs to develop a contract model in the second half of 
2008, Lima urged a multi-faceted expertise exchange, one that 
includes biofuels regulations as well. 
 
¶12. Lima noted that ANP also needs to finesse its plans for a better 
regulatory approach.  He mentioned an upcoming tender for bids to 
select a consulting company to propose a regulatory framework for 
high potential areas with low exploratory risk (e.g. pre-salt) as an 
excellent opportunity for collaboration. 
 
¶13.  This message was cleared/coordinated with Embassy Brasilia. 
 
 
MARTINEZ