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Editorial comment

This issue marks the end of yet another fascinating year for the oil and gas industry. Crude prices have certainly rallied, almost doubling from US$ 40 at the start of 2009 to a figure of US$ 79 at the time of writing. This increase reflects the global economic recovery, though for many analysts the crude price is in no way justified by the fundamentals of supply and demand. It is widely contended that up to US$ 30 of the crude price is currently being driven more by speculation than economic reality. The grave danger being that if forced beyond US$ 100, without the necessary underlying demand, it could well have a negative effect on the still fragile global economy. Nothing would be more damaging to sustained recovery than a spike in energy prices as witnessed in 2008. This will no doubt be a theme that continues well into 2010 as genuine confidence does come back into the market and oil demand increases.

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In looking back over the past year, it is clear that India and China have continued to dominate world headlines as they have eased out of recession and started to post double-digit growth figures once again. However, there is another emerging nation that in 2009 has demonstrated its credentials as a serious player on the world stage, namely Brazil. Traditionally respected more for the quality of its football and the sheer spectacle of its carnival, and all too often derided for its corruption and financial instability, Brazil is today turning heads. When the acronym BRIC was originally coined back in 2001, to represent Brazil, Russia, India and China, many disputed Brazil’s credentials in being linked with these other thriving economies at all. However, with the country now set to become the world’s fifth largest economy by 2015, overtaking both the UK and France, those same people are being forced to re-evaluate. One of the last nations to become embroiled in the global economic recession, it is has also been one of the first to recover and is now achieving an impressive 5% growth.

Much of Brazil’s recent success has of course been built on the vastness of its mineral and agricultural resources at a time when unprecedented growth in Asia has fuelled a global commodities boom. There is no better illustration of this than its new-found oil riches, which have propelled Brazil from self-sufficiency at best to international oil magnate. Whilst countries such as Iran and Mexico are struggling to remain exporters, the recent Tupi discovery in the Santos Basin, estimated to hold the equivalent of between 5 - 8 billon bbls of light crude oil, is the largest oil find for some years. Add to this the fact that Brazil is already the world’s largest exporter of coffee, sugar, chickens, beef and orange juice plus a major exporter of a plethora of other products from soya to wood pulp, and it is not hard to see why Brazil is attracting a great deal of investment attention. However, what makes Brazil so attractive to inward investment is not only its resources, but its relative stability in comparison to the other BRIC nations. Unlike China it is a democracy, unlike India it has no ethnic tensions and problems with terrorism, and unlike Russia it does not have a reputation for state interference with established contracts and agreements.

With the football World Cup in 2014 and the recently awarded Olympics in Rio de Janeiro in 2016, Brazil has finally assumed centre stage. Let us hope that it is able to sustain its growth and fulfil its tremendous potential as the next decade unfolds.

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