Brazil’s president-elect Luiz Inácio Lula da Silva – widely referred to as Lula – will return to the presidency after serving in the position for two previous terms, a period in which he guided the country to become the oil and gas powerhouse it is today. Now, he promises to create jobs and utilize state-owned Petrobras to catalyze the Brazilian renewables market. His experience developing Brazil’s domestic energy supply chain, combined with renewed political verve, could be the key to unlocking the country’s massive offshore wind potential.
True to his free-market ideals, President Jair Bolsonaro has shied away from creating targeted political mechanisms to facilitate the development of offshore wind energy, and instead, has largely taken a developer-led approach. Project plans for any proposed offshore wind farm are usually submitted by a developer on their own initiative, without any clear process for securing development rights for a specified seabed area. As a result, over 65 wind projects have been proposed offshore Brazil, many of which are for overlapping areas, and without a clear pathway to connect to the grid. It is unclear when, if ever, these projects will be granted development rights, or when they might come online. Lula’s inauguration on 1 January 2023 will signal that greater political clarity and predictability in Brazil’s offshore wind market is on its way.
Brazil’s oil and gas may have set the stage for offshore wind
In his previous administration from 2003-2010, Lula utilized Petrobras (among others) as a tool to drive economic growth in Brazil. Building upon stringent local content requirements set in place by his predecessors, Lula’s steady leadership during the discovery of Brazil’s pre-salt oil fields and subsequent ramp-up of the country’s oil and gas supply chains helped attract large-scale foreign investment. Through Petrobras, Lula directed this investment to boost activity at domestic shipyards and bolster employment rates in the sector.
Many have argued that Brazil’s high local content requirements contributed to rampant cost escalations and project delays in Brazilian oil and gas projects from 2008 – 2015. Nevertheless, the result of this rather painful growth was the creation of a thriving oil and gas market with a well-oiled supply chain. Now, Brazil’s oil and gas supply chain looks primed to deliver services and equipment for a developing offshore wind industry. And although the country has not yet outlined any specific award process for the offshore wind industry, the current process for oil and gas development still includes local content requirements, a stipulation which may hint at provisions to come for Brazilian offshore wind concessions.
Lula may push Petrobras’ diversification into offshore wind
In his election campaign, Lula’s 121-point program proposed to strengthen Petrobras as an integrated energy company by re-directing an increasing amount of business to new energy projects and soliciting foreign investment – moves that echo his previous strategy for the oil and gas industry.
Lula specifically highlighted the role of offshore wind in this shift in an interview with the association of Brazilian shipyards, SINAVAL, on 3 October. Lula stressed that his new government sees room for the “diversification of activities in the shipyard sector beyond platforms, vessels and repair of the existing fleet, including towers and ships for offshore wind energy”. According to SINAVAL, the number of jobs in the Brazilian naval sector fell by 80% from 2014 to 2020, largely due to lack of demand coming from Petrobras projects.
The offshore wind manufacturing comes into focus
Given its existing offshore oil and gas industry, not to mention its already thriving onshore wind market, Brazil’s current manufacturing capabilities are well suited for offshore wind, albeit with some modifications or expansions. This includes already existing manufacturing facilities for blades and mooring lines. Brazil’s yard capacity as well as shipping and offshore drilling rig fabrication expertise are particularly relevant, especially for offshore wind vessels and floating structures. Given the size and number of steel structures needed for large-scale wind farms, and Brazil’s location far from established offshore wind fabrication yards in Europe and Asia, its local yards could prove critical in rapidly developing a domestic offshore wind market.
This type of evolution, from offshore oil and gas to offshore wind, has already been proven. Spain is an excellent example, where the shipyard Navantia has for several decades delivered fixed and floating foundations to offshore oil and gas drilling rigs. In recent years, Navantia has begun delivering the same services for the offshore wind industry. Yards owned by Italy’s Saipem and UAE-based Lamprell have begun making a similar shift, having gained expertise in oil and gas that the companies are now using to serve the burgeoning offshore wind industry.
Lula brings offshore wind home
In light of his experience fostering the rapid expansion of Brazil’s oil and gas industry as a whole, and its supply chain specifically, Lula may be equipped to lead Brazil into a new era of energy production centered on offshore wind. The country is one of the few in the region with experience building floating units and applicable vessels. And, given the labor-intensive nature of such a build-out, offshore wind may be just the rallying call Lula needs to attract foreign investment and jump-start the job creation promises which delivered his election victory.