Now only questions linger, like the spreading oil stain on the ocean. What happened to P36? How could such a formidable piece of equipment have failed? Worse, had Petrobras, an icon of the modernizing Brazilian economy, thrown aside caution to meet production targets? Hardly a day goes by without one TV network or another replaying the final minutes of the rig disappearing with a gurgle in the Atlantic. Driven since its colonial days by the quest to harness its vast natural resources, the race for energy self-sufficiency has inspired Brazilian leaders for more than half a century. The rig called P36 was supposed to put them well on the path.
So much sank with P36. Known worldwide for its technological prowess, Petrobras practically created the industry standard for deep-water drilling equipment. Loyalists feared for its survival when Congress ended its monopoly in 1997, but Petrobras flourished. It shed tens of thousands of workers, retrained the rest, and by last year was posting a phenomenal $5 billion in revenues for 2000 when it announced plans to move into even deeper waters with P36. Brazilians celebrated in awe: the rig cost $480 million, stood 40 stories and could fill an entire city block. At full capacity, 180,000 barrels a day, it would provide a tenth of the nation’s energy consumption–from 2,000 meters below sea level. What better symbol for the debut of Petrobras as a modern enterprise?
Petrobras president Henri Phillipe Reichstul became a hero. Now he is roasted in Congress, vilified as a cold profiteer by oil workers and brutally caricatured as a incompetent in the press. Oil unions have revealed that gas leaks had been detected three days before the explosion on P36. Repairing the defective valve would have meant stopping production. Petrobras admitted the leak but denied irregularities, saying crews had temporarily fixed the problem until replacement parts could be imported. But the incident was further clouded when a Petrobras official purged reports of the leak from the company computer sites, saying he was “preserving information.”
Petroleum and peril go hand in glove, of course. But workers say they have good reason to be concerned. Twelve people have died just in the last 15 months at Campos Bay, where 80 percent of Brazil’s oil is found and the site of the P36 rig. The unions claim that the jewel of Brazilian state enterprise has been sacrificed on the altar of the market, and that Petrobras will now do anything to boost production and meet the country’s balance of payments obligations.
That is probably unfair. Well before P36 went down, Petrobras was investing more than $1 billion in new safety plans and equipment. Reischstul had ended dubious contracts with honeymoon suppliers, opened the company’s books, rewrote the accounting rules to come into line with world standards and sponsored road shows to sell the new Petrobras to world investors. Moody’s was about to declare Petrobras an “investment-grade” company the day P36 went down, and it has since done so. Petrobras is now officially the second most creditworthy company in Latin America behind Telmex, the Mexican telecom giant.
Yet valid questions remain. Union leaders argued before Congress that Petrobras is farming out work to subcontractors who are less well-paid and trained than the 26,000 workers who have been laid off in the past decade. The layoffs have all workers afraid to speak up, even about safety hazards, says Francisco Siqueira, president of the Brazilian Association of Petrobras Engineers, “We have created a breed of yes men.”
The official investigation is expected to end late this month but may never reach a conclusion. The evidence is buried deep. Petrobras itself will surely recover. It is too profitable (and well-insured) to fail. But it will take more than strong returns to restore the faith in Brazil, and its technological ability, that sink with the big rig.
