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Page last updated at 09:19 GMT, Monday, 8 September 2008 10:19 UK

Brazil oil boom 'to end poverty'

President Lula holds aloft the first oil extracted in a test drilling on 2 Sep
Lula was present when the first test extraction was made on 2 Sep

Brazil will use revenue from newly discovered offshore oil fields to eradicate poverty, President Luiz Inacio Lula da Silva has vowed.

In a TV address, President Lula said Brazil would not squander the money but invest in technology and education.

The exact scale of the deepwater fields, discovered last year, is not known but President Lula believes they could triple Brazil's reserves.

Their discovery has sparked an intense debate over how to use the profits.

In an address marking Brazil's independence day, President Lula said test drilling on 2 September was a symbolic moment in the country's life, "the opening of a direct bridge between natural wealth and the eradication of poverty".

It was not clear how many billions of barrels the reserves of oil and gas contained but they would make Brazil one of the biggest producers in the world, the president said.

"Brazil does not wish to be a mere exporter of crude. On the contrary, we want to add value to our oil by exporting derivatives which are worth more," he said.

Brazil aimed to have a sophisticated oil industry and in the coming years would build five new refineries, dozens of drilling rigs and platforms, as well as hundreds of ships, Lula said.

"We won't allow ourselves to be dazzled and go spending money that we still don't have on silly things," he added.

"(The reserves) are a passport for the future. Their main destination, I repeat, must be for the education of new generations and combating poverty."

State's stake

The discoveries were made last year by Brazil's state oil company, Petrobras, off Brazil's south-east coast, thousands of metres below water, rock and salt.

One field known as Tupi is said to hold between 5bn and 8bn barrels of oil and gas, while there have been suggestions from officials that another may contain as much as 33bn barrels.

The initial cost of extraction will be extremely high but the prospect of oil wealth has generated an intense debate in Brazil, says the BBC's Gary Duffy in Sao Paulo.

The government has made it clear it wants to take a bigger share of the profits and one alternative being considered is to create a fully state-owned company to manage the new reserves.

This is causing concern among some investors, our correspondent says.

Petrobras, although state-controlled, has some 60% of its capital in private hands.

And foreign firms operating in the area are also waiting to see what steps the government takes regarding extraction and exploitation of the reserves.

In the coming weeks a cabinet level committee is to issue a report on how best to manage the reserves.




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