Brazil's Lula says oil find is path to end poverty

Sun Sep 7, 2008 7:58pm EDT
By Raymond Colitt
BRASILIA, Sept 7 (Reuters) - Brazil has found a path to eradicate poverty in its recent oil discovery but will not squander money it does not yet have, the country's president, Luiz Inacio Lula da Silva, said on Sunday.
State-controlled firm Petrobras(PETR4.SA: Quote, Profile, Research, Stock Buzz)(PBR.N: Quote, Profile, Research, Stock Buzz) surprised the oil world last year with the second-biggest oil find in 20 years.
Since then Latin America's largest country has been gripped by a frenzied debate over how best to manage its new oil wealth. Despite years of strong economic growth under Lula, Brazil is still troubled by glaring poverty and inequality.
The tapping of the reserves with a test well on Sept. 2 symbolized "the opening of a direct bridge between natural wealth and the eradication of poverty," Lula said in a nationally-televised address commemorating Brazil's independence from Portugal in 1822.
Oil wealth would be spent primarily on education and eradication of poverty, creating "timeless and endless wealth" for the Brazilian people, Lula said.
The former metal worker, who has spoken about oil almost daily in recent weeks, said Brazil was seeing the crowning of a successful policy of growth and income distribution.
Lula said exact reserves were still unknown in the field that is 500 miles (800 km) long by 125 miles (200 km) wide off Brazil's southern coast.
"But one can say with full certainty, (they) will make Brazil one of the world's largest oil and gas producers," Lula said.
Critics say Lula is seeking to maximize political gains from the oil discovery before municipal elections on October 5.
Fernando Henrique Cardoso, Brazil's president from 1995 to 2002, warned on Sunday in O Estado de Sao Paulo newspaper of false nationalism and a pre-election climate in the oil debate of recent days.
TWO PRINCIPLES
Lula said the oil boom would be guided by two principles.
"We won't be dazzled and go spending money we don't have on silly things," he said in his short address.
Brazil would also export value-added derivatives and petrochemicals rather than crude oil, and build a sophisticated supply industry, he said.
"In coming years alone, five refineries, dozens of drilling rigs and platforms and hundreds of ships will be built," Lula said.
During an Independence Day parade Lula presided over earlier on Sunday, elementary school children dressed in orange overalls used by workers at Petrobras pulled a miniature float carrying a model oil drilling rig.
Argentina's President Cristina Kirchner, who on Saturday inaugurated an Argentine company's assembly line for electric generators in northeastern Brazil, was the guest of honor at the parade.
Lula praised Petrobras for finding the oil and said developing the deposits will be another challenge it would meet.
Pumping the oil from under a thick layer of salt up to 4.5 miles (7 km) under the sea will cost hundreds of billions of dollars as well as require cutting-edge technology.
Lula had said in August that the oil belonged to the Brazilian people and not to Petrobras and aides say he wants to increase state control over exploration and production.
Petrobras and foreign firms already operating in the area, such as ExxonMobil Corp (XOM.N: Quote, Profile, Research, Stock Buzz) and Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) are now waiting anxiously for Lula's administration to unveil new rules to govern the oil bonanza.
(Additional reporting by Ferando Exman, editing by Vicki Allen)