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R 091915Z JUL 09
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RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE

UNCLAS SECTION 01 OF 02 BRASILIA 000862 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG EINV SENV KGHG ETRD EINV EFIN PREL BR
SUBJECT: BRAZIL - DEPUTY ENERGY MIN ZIMMERMAN OUTLINES EXCELLENT 
COOPERATION OPPORTUNITES FOR DEPUTY NATL SECURITY ADVISOR FROMAN 
 
BRASILIA 00000862  001.4 OF 002 
 
 
(U) This message is sensitive but unclassified, please treat 
accordingly. 
 
¶1.  (SBU) SUMMARY:  At a June 18 meeting, Brazil's Deputy Minister 
of Mines and Energy Marcio Zimmerman outlined for Deputy National 
Security Advisor for International Economic Affairs Michael Froman 
the areas of expansion and possible cooperation in the Brazilian 
energy sector - hydropower, biofuels, nuclear, and oil and gas. 
Zimmerman saw excellent possibilities for greater involvement for 
U.S. firms, particularly in helping Brazil exploit its newly 
discovered offshore oil and gas reserves.  END SUMARY. 
 
¶2.  (SBU) During a June 18 meeting in Brasilia, Deputy National 
Security Advisor for International Economic Affairs Michael Froman 
received an extensive briefing from Deputy Minister of Mines and 
Energy Marcio Zimmerman on Brazil's energy sector and prospects for 
cooperation with the USG and the U.S. private sector.  The 
Ambassador and the Economic Counselor and ESTH Counselor accompanied 
Froman.  Chief of Staff Alexandre Peixoto and International Advisor 
Rueben Barbosa joined Zimmerman. 
 
GOOD PROSPECTS FOR INCREASED ENERGY COOPERATION 
 
¶3.  (SBU) Zimmerman observed that since he came to the ministry in 
2005 he has seen a significant strengthening of ties to the Embassy 
and the USG.  He sees many opportunities for the bilateral 
relationship, which he called a mature one between two similar 
countries.  Both are continental in size and have a range of 
experiences in the energy fields of interest to the other. 
Moreover, he pointed out the excellent relationship between 
President Obama and President Lula, who discussed energy cooperation 
in their March meeting.  Zimmerman reported that following the 
meeting with President Obama, President Lula instructed Energy 
Minister Edson Lobao to follow up with U.S. counterparts with 
increasing energy cooperation.  Zimmerman said he was looking 
forward to his July 6-7 trip to the United States, which will be 
followed by Minister Lobao's visit there July 20-21. (Note: this 
visit has since transpired and will be reported septel)  Beyond 
increasing bilateral energy ties, Zimmerman encouraged the USG to 
consider working in conjunction with Brazil in South America.  He 
suggested that some countries in the region had greater maturity 
than others and would be receptive to such trilateral energy 
cooperation.  Zimmerman offered the example of a possible 
Brazil-United States-Argentina energy cooperative effort. 
 
HYDROPOWER, BIOFUELS AND NUCLEAR 
 
¶4.  (SBU) Zimmerman noted that Brazil has developed a very clean 
energy matrix based on its natural resources - powerful rivers and 
ample sugarcane for ethanol.  With hydropower, he said that both the 
United States and Brazil had roughly the same quantity of generating 
power from dams.  Brazil confronts major challenges in developing 
and maintaining the grid to connect its remote hydropower facilities 
to faraway consumers.  He noted they had transmission lines as long 
as 4,500 kilometers.  Zimmerman suggested that the USG work with 
Brazil in responding with science to a study (he thought it was by 
the International Energy Agency in 2007) that claimed that 
hydropower plants with their large reservoirs emit as much 
greenhouse gases as a fossil fuel plant.  This study is a concern 
for Brazil, he stated.  In the area of biofuels, the USG and the 
Brazilian government in 2007 launched a collaborative effort, 
including scientific cooperation in developing the next generation 
of biofuels. 
 
¶5.  (SBU) Nuclear power and coal generating plants are growing in 
importance for Brazil because, Zimmerman said, environmental 
concerns were preventing building more large hydropower facilities. 
Therefore, he explained, Brazil would revive its nuclear energy 
program next year.  There will be ample opportunities for the United 
States, he said.  He added that Brazil began its nuclear program 
with Westinghouse, which built the first of Brazil's two nuclear 
power plants (Angra I).  (NOTE:  Brazil has already resumed 
construction of its third nuclear power plant - Angra III - in May 
2009, and plans to build four to eight more by 2030.  END NOTE.) 
 
OIL AND GAS 
 
¶6.  (SBU) Turning to oil, Zimmerman said, Brazil has discovered 
substantial offshore reserves.  While reaching these deep-water 
reserves posed a technical challenge, he was confident that 
Petrobras and others could meet it.  He opined that this oil would 
be economical at USD 35 per barrel.  This opened the door for 
further cooperation.  The state-energy company Petrobras already has 
ties with U.S. energy firms and now there are greater possibilities 
for U.S. firms here.  He regretted that Duke Energy had encountered 
problems and then stopped, which put a damper on U.S. firms' 
 
BRASILIA 00000862  002.4 OF 002 
 
 
activities in Brazil.  Since then European companies (Spanish, 
French, Belgian, Italian and Portuguese) have successfully entered 
the Brazilian energy market.  He urged U.S. firms to look again at 
Brazil and get to know it.  They have excellent opportunities here, 
he assured. 
 
¶7.  (SBU) The Brazilian government seeks to put in place a new 
regime to deal with these large finds.  Zimmerman said that they 
want a system that is balanced, which allows domestic companies to 
participate and grow, yet invites in foreign firms.  Brazil wants to 
use the Norwegian model, which would allow Petrobras to continue to 
grow.  Further, he said, they don't want petroleum to destroy their 
economy as has happened elsewhere. 
 
¶8.  (SBU) Brazil wants to be more than just a producer of crude in 
the petroleum market.  Zimmerman stressed that they wanted to do 
more processing, which will generate additional good jobs.  He 
pointed to their plans for building refineries: one in Recife with 
Venezuela's PDVSA (200,000 barrels per day); two in Fortaleza 
(300,000 barrels per day); and one in Sao Luis (600,000 barrels per 
day).  The Recife project was meant to promote energy integration 
with Venezuela, each would use 100,000 barrels per day.  This hasn't 
evolved as we expected, he lamented.  Recognizing that even though 
there aren't a lot of profits in refining, Zimmermann assessed that 
such a structure would be better for the Brazilian economy in the 
long term.  He then noted an economic model he likes, which might be 
applicable with refineries.  The iron ore firm Vale recently took a 
minority interest with a South Korean firm to produce steel in 
Ceara.  The benefit for Brazil is that it gains from the majority 
partner's existing distribution network.  When asked by the 
Ambassador about working with U.S. firms in developing its refining 
sector, Zimmerman said that it was a very interesting idea. 
 
¶9.  (SBU) Apart from oil, these new discoveries also include huge 
quantities of natural gas, Zimmerman stated.  The problem, however, 
is that this gas is located up to 300 kilometers offshore.  Brazil 
intended to liquefy the gas on ships rather than try to build a 
pipeline.  The liquefaction on ships on the high seas presented a 
technical challenge, he said.  However, this process would be better 
for Brazil because it could then be in a position to ship the 
liquefied natural gas (LNG) to foreign markets.  He did not expect 
the Brazilian market to use much LNG, though on occasion there might 
be times it would be used to supplement the power generated by the 
hydropower plants. 
 
¶10.  (SBU)COMMENT:  This meeting immediately preceded a visit Deputy 
Minister Zimmermann made to the United States beginning July 6 and 
ending July 10, and sets the stage well for the interests he pursued 
during that visit (SEPTEL).  These discussions, both in Brasilia and 
in Washington, highlight many possible areas of cooperation between 
Brazil and the U.S. both bilaterally, regionally, and globally.  The 
upcoming visit by Minister of Mines and Energy Edison Lobao to 
Washington, tentatively set for July 20-21, offers an opportunity to 
formalize and institutionalize these areas of cooperation as 
explored during this meeting and the subsequent Zimmermann trip to 
the United States.  END COMMENT. 
 
SOBEL