Natural Gas

Brazil has up its ante in its move to build a military force to protect an offshore field that could be one of the largest discoveries in years.

The South American nation has publicly announced plans to add a nuclear-powered fast attack submarine based on the French Scorpeon design to their fleet. They are working with the French to develop the reactor for the vessel.

Their goal is to protect a field that was discovered by Petrobras that could contact as much as 5 billion to 8 billion barrels of oil. If even the most conservative estimates are correct, this would be one of the world’s largest discoveries in the past 20 years.

In the latest move, the Brazilians have short-listed Dassault in a bid for 36 aircraft that will have both a fighter and ground-attack role. In several public speeches, French President Nicolas Sarkozy has said his nation has agreed in principle to have French-designed submarines and military helicopters built in Brazil to help beef up its strategic presence in South America.

The Brazilians, according to President Luiz Inacio Lula da Silva, will spend about $880 million to develop the reactor for their submarine.

Brazil currently has five conventional, German-built submarines in their fleet. The millions being spent for the one nuclear boat would buy–at current prices–about 20 conventional, long-range boats. Either way, Brazil is on the fast-track to becoming a nation with one of the most advanced submarine fleets in the world.

The Brazilian air force is also in on the spending spree. In a bid for 100 next-generation fighter aircraft, they are looking at Boeing’s F-18 E/F Super Hornet, SAAB’s Gripen and Dassault’s Rafale as the top three finalists for a contract that would be worth billions.

Stay tuned. More to come. Even while critics inside and outside the country continue to raise eyebrows over the decision to build a nuclear submarine, Brazil is moving forward and selecting the French is a good decision since they did not accept either Russian or U.S. assistance. This story is far from over. Watch for more developments around the first of the year.

–John A. Sullivan, News Editor, Oil and Gas Investor, www.OilandGasInvestor.com, jsullivan@hartenergy.com

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