Brazil's energy strategy in Itaborai raises climate concerns

It wasn't long ago that the city of Itaborai was mentioned mainly in connection to Brazil's gradual economic decline. The industrial city, located about an hour's drive from Rio de Janeiro, was at the center of corruption investigations surrounding the state-owned oil company Petrobras.

Falling oil prices and the COVID-19 pandemic added to the challenges, and have plunged the once-flourishing industrial hub into a deep economic depression with mass unemployment.

Thiago Rodrigues da Silva from the Sintramon labor union said the situation over the past five years transformed Itaborai into a city "practically in hibernation."

But now there is hope, he told DW, thanks to the plans of President Luiz Inacio Lula da Silva who aims to revive and expand Itaborai as a center for oil and gas production.

Oil country seeks energy independence

Lourival Cabula, Itaborai's deputy mayor — and who, like the country's president, is a member of the Workers' Party (PT) — firmly believes in the "second chance" given to his municipality.

The infrastructure is in place, so now all that is needed are manageable investments, he told DW. Lula da Silva's plan to finish construction of two refineries is crucial for reducing Brazil's dependence on oil refineries abroad.

"We want to do it ourselves now, and here in Itaborai, we have all the prerequisites for that," he said, adding that the new facilities would be a major step toward energy independence.

Union leader Thiago Rodrigues is more cautious but still optimistic: "It looks like business is picking up again," he told DW.

But it's not only political leaders welcoming the upgrades for Itaborai. The president of the Brazilian Oil and Gas Institute, Roberto Ardenghy, told the country's business magazine Valor recently: "Why not expand the refinery complex and transform Brazil into a country with more refining capacity? Such investments are essential to avoid supply shortages, especially in diesel fuel."

Fossil-fuel investment a contradiction?

Not everyone is enthusiastic about the government's oil ambitions. Environmentalists are horrified by exploration plans in the Amazon rainforest, accusing Lula da Silva of breaking his promise of protecting the region.

As a huge chunk of Brazil's planned energy investments are earmarked for the fossil-fuel sector, public criticism is also mounting. 

The daily Estadao headlined a recent article with: "Petrobras: the last oil producer in the world." Its columnist Celso Wing wrote that Lula's energy policy is full of "significant contradictions and uncertainties about the energy-transition strategy that could jeopardize the country's competitive advantage."

While environmentalists and political leaders, mainly in Europe, are hoping Brazil could become a major producer of green hydrogen, the government has embarked on a course of expanding fossil-energy output.

Petrobras, the country's state-owned oil major, boosted oil production to beyond 3 million barrels per day (bpd) in May 2023, from about 2.12 million bpd in March 2016.

Hope and optimism in Itaborai

Despite massive protests from climate activists, Brazil's energy policy should be given a "fair assessment," said Itaborai's deputy mayor. "We will work in accordance with international standards. You can rest assured that Brazil will comply with all the rules, and that Lula won't do what is not allowed [in the oil business]," said Lourival Cabula.

Cabula noted that the government plans to "strengthen its energy autonomy," while at the same time ensuring Brazil becomes, "one of the largest producers of renewable energy in the world" in less than a decade.

Brazilian's "shouldn't pay for the same mistakes again," he added, referring to the decline of Itaborai's oil industry, which saw hotels and businesses bankrupted and mass worker layoffs in the wake of the crisis.

"I really believe in the project," he said.

Union leader Thiago Rodrigues is also feeling tailwinds from the investment, with business sentiment "improving" and people being "more optimistic."

"I hope that in three or four years, Itaborai will be what it used to be — a large community with a good income situation, and citizens who are proud to work in their city and no longer have to look for work elsewhere."

This article was originally written in German.