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NSA Spied on Brazil Oil Company, Petrobras—What WikiLeaks Cables Reveal About Possible Motivation

Brazil’s state-controlled oil company, Petrobras

A Brazilian television program has revealed that the National Security Agency in the United States spied on the internal and private computer networks of the oil company, Petrobras, which is partly state-owned.

Globo TV’s “Fantastico” program reported top secret documents from former NSA contractor and whistleblower Edward Snowden, which were provided to program by Guardian journalist Glenn Greenwald, include a May 2012 presentation used to “train new agents step-by-step on how to access and spy upon private computer networks—the internal networks of companies, governments, financial institutions—networks designed to precisely to protect information.”

“The name of Petrobras—Brazil’s largest company—appears right at the beginning, under the title: ‘MANY TARGETS USE PRIVATE NETWORKS,’ Globo noted.

Several slides feature the name Petrobras, as the presentation explains how target companies can be monitored.

Globo additionally reported, “Individual folders are created for each target – and contain all the intercepted communications and IP addresses – the identification of each computer on the network – which should be immune to these attacks.”

An individual with a Ph.D in “information security,” Paulo Pagliusi, who analyzed the documents for “Fantastico,” concluded the documents were evidence of “systematic spying” and it “had been going on for a while.”

“You don’t obtain all of this in a single run. From what I see, this is a very consistent system that yields powerful results; it’s a very efficient form of spying,” he told the television program.

This expressly undermines a previous claim by the NSA that it does not spy for “economic purposes.” It disproves what an NSA spokesman told the Washington Post on August 30, which is that the agency, a part of the Defense Department, does not “engage in economic espionage in any domain, including cyber,” even though the department engages in computer network exploitation.

The motivation for being interested in the operations of Petrobras is, for the most part, clear. The United States Energy Information Agency (EIA) highlighted in a brief on the country dated February 28, 2012, how Brazil recently discovered “large offshore, pre-salt oil deposits” that “could transform Brazil into one of the largest oil producers in the world.”

It described “state-controlled Petrobras” as the “dominant participant in Brazil’s oil sector, holding important positions in up-, mid-, and downstream activities.” Petrobras held a “monopoly on oil-related activities in country until 1997, when the government opened the sector to competition,” which included Royal Dutch Shell, as the first foreign crude oil producer. Chevron, Repsol, BP, Anadarko, El Paso, Galp Energia, Repsol, Statoil, BG Group, Sinopec, ONGC and TNK-BO became foreign producers of crude oil as well.

Brazilian officials have suggested that NSA spying must be motivated by the US government’s interest in this massive discovery of oil and natural gas. Minister of Communications for Brazilian President Dilma Rousseff, Paulo Bernardo, stated, “The spying is of a commercial, industrial character. It is the interest [of the US] to know about issues of the pre-salt [offshore oil finds] and other issues of economic and commercial weight.”

Prior to this story, Rousseff suggested in a meeting with ministers the “pre-salt layer” was the interest that had driven the NSA to spy on the company.

In fact, there is a major auction scheduled in October around the time that Rousseff is currently scheduled to visit Washington, DC. US oil companies plan to participate. If any of these oil companies received tips related to any of the intelligence collected on the reserves that will be up for auction, that would provide an edge to that company:

Former Petrobras Director Roberto Villa considers this the greatest action in the history of oil exploration. “It’s a very peculiar auction. The auction of an area where we already know there’s oil, there’s no risk”, he says. What no one else should know, Villa says, is which are the richest lots. “Petrobras knows. And I hope only they know.” He considers that such information, if stolen, could give someone an advantage. “Someone would have an edge. If this information was leaked and someone else has obtained it, he would be in a privileged position at the auction. He’ll know where to invest and where not to. It’s a handy little secret.”

In terms of pre-salt oil, EIA outlined:

A consortium of Petrobras, BG Group, and Petrogal discovered the Tupi field in 2007, which contains substantial reserves in a pre-salt zone 18,000 feet below the ocean surface under a thick layer of salt. Following Tupi, numerous additional pre-salt finds were announced in the Santos Basin, such as Iracema, Carioca, Iara, Libra, Franco and Guara. Additional pre-salt discoveries were also announced in the Campos and Espirito Santo Basins. Estimates for the total pre-salt resources vary. Some analysts place total extent of pre-salt recoverable oil and natural gas reserves at more than 50 billion barrels of oil equivalent (boe). [emphasis added]

Significantly, Petrobras has not only been of interest to the NSA and the EIA but the US State Department too. Diplomatic cables published by WikiLeaks show a focus on the operations of Petrobras and an overt willingness to fight for the interests of US oil companies while conducting meetings with Brazilian officials.

Though before the discovery of the Tupi field in 2007, an unclassified cable sent on June 13, 2006, containing “business-confidential information,” shows US firms “involved in upstream petroleum sector operations” complained about “Brazil’s inadequate climate for foreign investment.” Representatives from Exxon-Mobil, Chevron and El Paso indicated “Petrobras’ dominance meant that independent players, even well-funded one, needed to tread lightly.

“While doing business in Brazil was certainly easier than operating in Bolivia, we were told, in many ways the majors found investment conditions worse than those in Venezuela,” according to the cable.

“Chevron’s Tim Miller noted that even though his company often partners with Petrobras on the E&P side, it sometimes receives the thumb-screw treatment from the company’s gas division.” And, “In one off-shore field where Chevron had found gas reserves, Petrobras, which owned the only pipeline to the shore, had offered the company a mere 70 cents per million BTU for the gas, knowing full well that Chevron’s only alternative was the risky gambit of re-injecting gas into an underground reservoir.”

The animosity in the industry toward Petrobras is palpable. Exxon-Mobil’s Brazil President John Knapp, while complementing Petrobras, called it an “800-pound gorilla” and acknowledged its “state-run status gave it access to key information about specific blocks which ensured that it always was able to purchase the most promising parcels.”

A January 28, 2008, cable on an “oil roundtable discussion with US oil companies” and US Ambassador Clifford Sobel, including the “CEOs of Chevron, Exxon Mobil, Devon Energy, Anadarko and Hess Corporation” provides further evidence of the extent of the US government interest in helping oil companies overcome the dominance of Petrobras.

“Expressing the view of all present, John Knapp, President of Exxon Mobil, confirmed that Exxon had a great deal of interest in Brazil because of perceived substantial undiscovered potential beyond even the Tupi field that Petrobras recently discovered,” according to the “sensitive but unclassified” cable. Knapp “expressed concern about the recent unstable investment environment caused by Rio State tax changes, oil blocks being removed in the last two auctions, and the Government of Brazil’s (GOB) apparent willingness to change the oil concession contracts.”

Devon Energy President Murilo Marroquim suggested at that “Petrobras had lied about the easy prospects of finding oil in under-salt areas due to the Tupi discovery. He believed Petrobras influenced the GOB to remove the blocks from the 9th oil auction to avoid stiff competition with other bidders. Devon asserted that Petrobras did not have sufficient drilling equipment so had an interest in removing those blocks to allow more preparation time for it to bid for those blocks in future auctions.”

When 51-year-old Brazilian entrepreneur Eike Batista launched oil company OGX to challenge Petrobras share of the market in 2007, a “sensitive but unclassified” cable sent on June 27, 2008, highlighted this development. It noted that OGX hired former Petrobras President Francisco Gros and had “lured more key executives away from their positions at Petrobras in exchange for equity in Batista’s companies, making them instant millionaires.”

Also, “In October 2007, just one month before Brazil’s ‘Ninth Bid Round’ lease sale for new offshore exploration blocks, OGX delivered an especially damaging blow to Petrobras’ interests. Petrobras’ Manager for Exploration and Production Paulo Mendonca and Contracts Manager Luis Reis defected to OGX, bringing with them intimate knowledge of Petrobras’ bidding strategy in the upcoming auction such as which blocks Petrobras wanted and how much it was willing to bid.”

While it is unclear whether the State Department was as delighted as oil companies to see someone taking on a “monopoly,” the diplomat who wrote the cable commented:

OGX’s dramatic entry into the Brazilian oil industry is significant. With the financial backing of Batista, OGX has built a formidable team. U.S. oil company contacts have privately shared how they are reveling in Petrobras’ frustration with having to deal with real competition from a domestic company for the first time. Worth watching is Petrobras’ further reaction as OGX gears up to drill wells. Though OGX can hire top people and win exploration blocks with money alone, it will need partners to drill for and produce oil. We are hearing that Petrobras is strongly discouraging (i.e. threatening to cut them off from Petrobras projects) its own partners from working with OGX. It remains to be seen if OGX can successfully convince potential partners to stand up to Petrobras.

In August 2009, according to another diplomatic cable, “petroleum actors and insiders in Rio de Janeiro” derided “pre-salt reform” proposals as “pre-election politicking” by the administration of Luiz Inacio Lula da Silva. The proposal to have Petrobras be the “sole operator” of “unlicensed blocks” of reserves led Exxon Mobile’s External Relations Director Carla Lacerda, to suggest this “constituted a reversion to Brazil’s former monopoly system.” It could have an adverse effect on “US equipment and service supply to Brazil.”

The Brazilian National Congress eventually was successful in passing reforms, which maximized Petrobras’ ability to make profits off the discovered pre-salt fields.

On August 2, 2013, Rousseff signed a decree creating Pre-Sal Petroleo, “a new state-owned company to manage contracts for large oil and natural gas fields in the offshore pre-salt region.”

While the cables and documents from Snowden contain no specific proof that oil company executives were given tips on the status off offshore oil exploration, they do indicate a questionable and possibly unethical interest in helping oil companies succeed against Petrobras. And, as, a website specializing in coverage of oil and gas in pre-salt areas, reacted, “Petrobras holds unique knowledge in offshore oil exploration in high depths and very high pressures and Brazil holds the largest world reserves known in the pre-salt. If the NSA invaded and violated the servers of Petrobras, [it] was not to find Bin Laden [but] probably was to capture information about technologies, research and knowledge that Petrobras holds.”

Furthermore, “These technologies and information about exploration and production of oil and gas in ultra-deep wells, such as in the Brazilian pre-salt, is of inestimable value to the oil industry,” Fernando Busquet wrote for the website.

Even if the intelligence never was shared by officials or analysts with oil companies, it still should be considered improper to have the NSA targeting the networks of Petrobras. Whatever information was gained from targeting the networks would have been stolen or misappropriated information essentially gained through hacking or network exploitation, which means the NSA was engaged in economic espionage. Plus, the US government has not typically embraced state-driven capitalism.

Globo had previously reported that the NSA spied on the phone calls and emails of Rousseff. She has demanded an explanation.

“This is what I asked: It’s very complicated for me to learn about these things through the press,” Rousseff declared last week. “I read something one day, then two days later I learn something else, and this goes on piece by piece. I’d like to know what exists (about spying). I want to know what’s going on. If there is something or not, I want to know. Is it real or not? Besides what’s been published by the press, I want to know everything they have regarding Brazil. The word ‘everything’ is very comprehensive. It means all. Every bit. In English, ‘everything.'”

President Barack Obama apparently told the Brazil president he would look into allegations of spying in news reports. Whether he will follow-up and provide information to Brazil is unclear, however, revelations around the NSA could possibly lead to Rousseff refusing to make an upcoming visit to the United States in October.

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Kevin Gosztola

Kevin Gosztola

Kevin Gosztola is managing editor of Shadowproof. He also produces and co-hosts the weekly podcast, "Unauthorized Disclosure."