SOME AVENUES FOR REGIONAL ENERGY COOPERATION WITH BRAZIL ARE

C O N F I D E N T I A L BRASILIA 000253


CONFIDENTIAL

FOR WHA A/S SHANNON, USOAS AMB. MORALES, AMB. DAVIDOW, WHA/EPSC AND
WHA/BSC
FOR DOE CGAY, GWARD, RDAVIS
SOUTHCOM FOR JOANNA GUITIERREZ

E.O. 12958: DECL: 02/05/2019
TAGS: PREL ENRG ECON KSUM BR
SUBJECT: SOME AVENUES FOR REGIONAL ENERGY COOPERATION WITH BRAZIL ARE
OPEN

REFTELS: A) Brasilia 158 B) Brasilia 224

Classified By: Ambassador Sobel, Reason 1.4 (b) and (d)


1. (SBU) Summary: In separate meetings, both Brazil's Minister for
Mines and Energy and his Deputy Minister have recently reconfirmed
their interest in hemispheric energy cooperation. While other parts
of the Brazilian government have been less positive in their
assessments of the chances, or indeed desirability, of energy
cooperation in the hemisphere (reftels) both Energy Minister Lobao
and his deputy offered concrete suggestions for ways in which such
partnerships might be most productive, such as support for
hydropower, regional research centers, and rural electrification.
Lobao is very open to meeting with Energy Secretary Chu and has
opened his schedule to us to try to facilitate such a meeting. In
addition to positive engagement on possible hemispheric cooperation,
both have identified more options for bilateral energy engagement
including developing natural gas liquefaction technology at deep sea
oil platforms, increasing use of wind power, and identifying ways to
increase energy efficiency in water treatment. END SUMMARY


2. (SBU) Ambassador Sobel met with Deputy Minister for Energy
Mauricio Zimmermann on February 21 to seek Brazilian input for
further energy collaboration bilaterally and regionally. Zimmermann,
who said that he felt regional cooperation was a good idea, indicated
that energy is one of the biggest challenges and best development
opportunities facing the region. According to Zimmermann, U.S. per
capita usage of energy is 3000 kilowatts(kw)/year, and Brazil's is
2013 kw/year, while many other countries in the region use only
700-900 kw/year. He also observed that the Mercosul region is one of
the most mature energy markets in the western hemisphere and as such
has the most potential for integration. Recent experience for Brazil
has indicated that integration efforts require the force of treaties
to be successful. Of the past five integration efforts, the only two
that have proven successful, the Itaipu dam which provides hydropower
to Brazil and Paraguay, and gas supply agreements with Bolivia, have
treaty agreements supporting them (Note: even these arrangements have
encountered significant problems). According to Zimmermann, the
Ministry of Mines and Energy (MME) is currently conducting a study on
how to integrate the electrical sectors of Mercosul countries along
the lines of the European Union. There is also a project currently
under way to examine, at the request of the Minister of Mines and
Energy, Edson Lobao, how to integrate energy issues throughout South
America. (Note: In a later meeting, Minister Lobao said he expected
this study to be finalized in two to three months and would share the
results with the Embassy. The fact that MME is looking at how to
integrate energy in South America and is willing to open that process
to the United States could be extremely useful in deciding how we
best approach hemispheric cooperation. End note.)


3. (SBU) Pressed by Ambassador Sobel for examples of how the U.S.
could add value in integration efforts, Zimmermann cited the
potential and need for expanded hydropower as one possible area of
focus. Zimmermann said that although South America has the potential
for up to 600,000 megawatts of hydropower production, less than 20
percent of that was being utilized, due to environmental concerns.
He suggested that the United States could work with Brazil in
creating a consensus in international fora, especially the World
Bank, that hydropower is a sustainable technology. When asked about
his awareness of a research center on renewable energy planned in
Chile, Zimmermann indicated that he was aware of the project and that
he thought it could be a possible project for regional cooperation.
Zimmermann also pointed to Brazil's own project financed with UNDP at
Itaipu for research on hydropower as a possible model for regional
research. When Ambassador Sobel, building on these examples,
suggested that a way forward in regional energy cooperation could be
regional centers each pooling scientific cooperation and research in
a "Centers of Excellence" model, Zimmermann concurred.

4) (C) Zimmermann then responded separately to Econoff's queries on
other areas that could be opportunities for cooperation; agreeing
that one possibility is rural electrification, an area in which both
the United States and Brazil have great experience to share in the
hemisphere, as well as the possibility to work together to develop
remote generation sources (Note: post understands this may be an area
of Defense Department interest). He also expressed curiosity about
the possibility that the U.S. may have technology applicable for deep
sea liquefaction of natural gas, which Brazil will soon undertake in
the areas of deep sea oil discoveries announced in 2007, to try to
capitalize on the attendant natural gas. He also offered that in the
area of energy efficiency, Brazil would welcome the opportunity to
focus on improving efficiency in water treatment plants, a large
challenge for Brazil. Zimmermann said that given the lack of
commercial interest in Brazil's marginal oil blocks, technology in
that field would be of less interest. He agreed that there are many
possibilities for expanding the 2003 Bilateral MOU for energy
cooperation between DOE and MME, a vehicle we have recently used to
establish new bilateral working groups on nuclear energy, energy
efficiency, and clean coal.

5) (SBU) Ambassador Sobel met with Minister Lobao on February 25 to
continue the discussion on possible regional cooperation. Lobao
reconfirmed his support for hemispheric energy cooperation and
committed to have Deputy Secretary Zimmermann further flesh out some
possible ideas - bilaterally under the 2003 MOU, as well as
hemispherically. He agreed that rural electrification is an area in
which Brazil has much to share and that any U.S. expertise available
on floating platforms for liquefaction of natural gas would be
greatly welcome. Noting that Petrobras would begin building a
platform in May to exploit resources in the very promising but
challenging new deep sea blocks in the Tupi area, he would welcome a
visit by Energy Secretary Chu to witness the work and discuss what
type of bilateral cooperation might be possible there. Noting that
the Brazilian sugar cane and ethanol trade association, UNICA, is
planning a major biofuels conference June 1 -3, to which Secretary
Chu is invited, Ambassador Sobel committed to look into that
timeframe for a possible visit by the Secretary of Energy. Lobao
also indicated Brazil's interest in developing more wind power,
particularly in a new wind turbine being made by Boeing with two
propellers instead of three, to allow generation from wind at any
angle and much greater heights.


6. (C) Comment: It is clear that Brazil's Ministry of Mines and
Energy is convinced of the benefits of hemispheric cooperation and
has some creative ideas as to how to best pursue a collaborative
agenda. To the extent that any questions regarding a possible energy
partnership of the Americas are routed through energy ministries, we
believe they will be met with great receptivity in Brazil. Post
would recommend a meeting between Secretary Chu and Minister Lobao at
the earliest opportunity, particularly in advance of the late June
regional energy symposium as conceived of by DOE, perhaps using the
occasion of the June 1 - 3 UNICA conference for a visit. Such a
meeting would allow the USG to coordinate positions with one country
that will be a key to success or failure in a hemispheric energy
initiative. As reported reftels, other channels for pursuing this
agenda may offer less auspicious prospects. While hemispheric energy
cooperation will clearly require finding ways to work with others in
the Brazilian government who may be less inclined towards such an
approach, the positive engagement offered by the Ministry of Mines
and Energy could be a building block for a hemispheric partnership.
In the meantime, Embassy Brasilia is working closely with the
Ministry of Mines and Energy and the U.S. interagency community to
identify promising areas for bilateral cooperation - a partnership
that would seem to offer opportunities limited only by resources.
Mines and Energy and DOE appear to have settled on a group of dates
for teleconferences in March to bring together the three working
groups on nuclear energy, clean coal, and energy efficiency. These
three groups represent the tip of the iceberg of the numerous options
for the United States and Brazil to work together to advance energy
security in our two countries, and the hemisphere, while continuing
to build strong bilateral relations.

SOBEL