Brazil: Offshore, upset

Last week’s temporary reprieve in the oil price might prove just that.  The Oil Workers Federation (FUP), the umbrella workers’ group at Brazil’s state-controlled oil company Petrobras, will meet on Friday to discuss a possible national strike from August 5 that could potentially shut down oil operations.  The move would follow a five-day strike that ended on July 18, involving workers at Petrobras’s offshore operations in the Campos Basin, before expanding. 

The risk of new strike action comes after unions rejected a profit-sharing proposal from Petrobras, claiming that it had made an earlier, higher, offer.  Moreover Petrobras has still not addressed the main issue behind the Campos strike, namely that the days on which workers travel back from offshore platforms be counted as paid work days. 

Union demands are being driven by high oil prices, as well as the rapid expansion of Petrobras’s offshore operations after recent giant discoveries -- making offshore working conditions increasingly salient.  Although the earlier strike did little to affect production, the strike looming on August 5 could be a different matter, affecting offshore production, refineries and distribution centres -– and potentially international oil prices. 

Petrobras plans to invest some 33.5 billion dollars in exploration and exploitation this year, the largest such investment programme in the world. The size of the investments required imply that it will continue to need foreign investors in its offshore operations, which the ongoing risk of strike action could deter.  The discovery of a new offshore oil province with such enormous potential will change the dynamics of oil and gas markets in the Americas. However, realising the potential of these discoveries will require increased efficiency on the part of Petrobras, as well as long-term financial and human resource commitments from the company, the government and the private sector.