Brazil's efforts to become one of the world's major oil producers have attracted businesses such as U.S. drilling giants Halliburton and Baker Hughes, gained it partnerships with oil companies from India and China, lured immigrants from idyllic Norway and drawn investment dollars from American pension funds in Florida, South Carolina and California.
But the prospects for success have darkened in the seven years since Brazil first identified massive oil deposits in deep water off its coast. Many fear that Brazil's chance to become one of the world's major energy producers is fading as the global energy landscape changes dramatically.
Signs of disarray are many. Development of the prized deep-sea pre-salt fields, so called because they lie below thousands of feet of salt deposits, faces delays, with the next auction of drilling rights not expected till next year.
Brazil's giant state-owned oil company, Petrobras, is in tough financial shape, with profits down 30 percent in the first three months of the year and its stock market value less than half what it was when the company went public in 2010. Production problems in Petrobras' oil fields have forced the country once again to import oil, at an average rate of 793,000 barrels per day in the first quarter.
Making matters worse, the company faces corruption allegations. A former executive has been jailed and faces charges of money-laundering. Brazil's Congress has opened an investigation.
Meanwhile, the world is not standing still. The United States is moving closer to energy independence, largely because of a revolution in natural gas production from hydraulic fracturing, or fracking, the controversial process of injecting water and chemicals into deposits deep underground. Mexico is about to open its long-closed petroleum sector to international investment, and countries such as Colombia are ramping up oil exploration and production. The opportunity to woo customers who are seeking new sources of oil during the sanctions on Iran already has been missed.
"Pre-salt looks like it is going to be less of a bonanza than Brazil thought it would be," Peter Hakim, president emeritus of the Inter-American Dialogue, a policy center in Washington, told McClatchy.
The issue goes beyond Brazilian national pride _ something that's already taken a hit as the country's preparations, or lack thereof, for the World Cup have become the topic of global discussion. The quadrennial global soccer tournament begins next week amid complaints from the world soccer federation that some of the venues aren't ready.
Also at stake is Brazil's promise of energy independence, the health of its overall economy and the personal savings of many Brazilians who invested in Petrobras.
Americans also have a financial stake in the company, though many may not realize it. The U.S. pension funds that hold bonds or stock issued by Petrobras are some of the United States' largest: the California Public Employees' Retirement System, the California State Teachers' Retirement System and the New York City Employees' Retirement System.
Others include the State Board of Administration of Florida, the Washington state Public Employees' Retirement System and the South Carolina Retirement System.
Those investments came when Wall Street and Brazil were euphoric about the pre-salt discoveries, which Luiz Inacio Lula da Silva, then Brazil's president, likened in 2007 to a "winning lottery ticket" and Brazil's "passport to the future."
On a state visit in 2011, President Barack Obama offered what was seen as a major vote of confidence. "When you are ready to start selling, we want to be one of your best customers," he said.
That was before widespread U.S. fracking changed how much oil the U.S. would require to import.
Now the future looks less promising.
Late last year, the first auction of drilling rights in the offshore Libra field, thought to hold 8 billion to 12 billion barrels of oil, fizzled after Brazil passed laws that required greater state control. Only one bid was submitted _ Magda Chambriard, the director of Brazil's National Petroleum Agency, had said she expected 40 companies to participate _ and it won by default. The consortium that offered the bid included Petrobras, which took a 40 percent ownership stake, the European companies Shell and Total, and the Chinese companies CNOOC and CNPC.
American majors Exxon Mobil and Chevron sat out the auction.
Many Brazilians were unhappy, too, though for different reasons. They want the government to take even more control.
More than two dozen lawsuits were filed trying to halt the Libra auction. What should have been a mundane gathering of oil executives in a hotel meeting room drew nationwide protests.
More than 1,100 security and military personnel were present.
Notably, the former spokesperson to former President Lula wrote a harsh opinion piece in the newspaper Folha de Sao Paulo that contended the country's current president, Dilma Rousseff, Lula's protegee, had betrayed a campaign promise she made in 2010 not to privatize the pre-salt production.
With elections scheduled for October, the government has pushed the next auction of pre-salt drilling rights into next year _ at the earliest.
The country's predicament is complicated by the expansion of its middle class. That's meant increased fuel consumption, as better-off consumers buy new cars. Yet Petrobras, which hasn't built a new refinery in more than 30 years, can't produce enough gasoline to meet its domestic demand. That means it's had to pay higher international prices to make up the difference.
But the government has long controlled how much Petrobras can charge at the pump. The resulting gap between the high price the company must pay and the lower price at which it can sell _ called the gasoline trade deficit _ is expected to soar 25 percent this year, to $2.5 billion, from last year's $2 billion. So far, government officials appear unmoved by pleas from Petrobras executives that they be allowed to raise prices.
Brazilians are told there are reasons to remain optimistic.
In March, Petrobras raised $8.5 billion in new corporate bonds in the United States in one of the largest corporate debt issues anywhere in recent months. The International Energy Agency predicts that U.S. oil production will begin declining again in 2020. By 2035, the agency predicts, Brazil will be producing 6 million barrels per day of crude, making it the world's sixth largest producer and accounting for one-third of the increase in global oil production.
The Brazilian investment bank Itau BBA wrote in a recent research note that it expected domestic crude oil output this year to rise 5.7 percent, and there are hopes that price controls on gasoline will be eased after the October elections.
Still, 2035 is a long way off, especially with so many countries _ including China _ now looking to fracking as a way to produce more natural gas and oil. Higher prices for gasoline are hardly what Brazilians have been hoping for.
The answer again is that Brazilians will need to be patient before the promise of oil wealth is fulfilled.
"It's going to take more time than estimated," said the Inter-American Dialogue's Hakim. He also said that shouldn't come as a surprise: "When did any mammoth project ever come in on time and under budget? This is a monumental challenge involving management, financing, technology, politics and good luck."
By Vinod Sreeharsha
McClatchy Foreign Staff