High-Grade Crude Found in Rain Forests

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N.Y. Times News Service

URUCU, Brazil - A solitary, yellow-tipped drilling rig emerging from an endless horizon of green trees in Urucu is a sign that Brazil has finally struck oil in the Amazon region.

An outpost of heliports, prefabricated dormitories and air-conditioned offices has been built in the forest around the first commercially viable oil and gas fields found in the Amazon region since exploration began in 1917.

And at every step, Brazilian officials say they have taken great care not to damage the rain forests or the environment.

After two years of production, volume is small - only 5,000 barrels of oil a day. But hopes are so high that the jungle fields have become the largest destination for domestic investment by Brazil's state oil company, Petroleos Brasileiros SA, or Petrobras.

``The crude is so light that we could put it directly in the fuel tanks of the diesel trucks and jeeps,'' Arlindo Augusto Alves Filho, a company operations official, said as he perspired under the humid, 100-degree heat of in the camp, which is two degrees south of the equator.

By 1995, officials hope, Urucu oil wells will be pumping 20,000 barrels a day, enough to make the state of Amazonas, an area twice the size of Texas, self-sufficient in oil. Currently, the 10,000 barrel-a-day refinery in Manaus, the state capital of 1.3 million people, is supplied by tankers that churn up the Amazon River from Atlantic Coast oilfields - a 10-day, 1,000-mile voyage.

Of equal interest are huge gas finds in Urucu and 100 miles to the west, at Jurua. Recoverable volumes of both fields total 60 billion cubic meters, enough to supply Brazil's current gas needs for 20 years.

The gas fields are 2,000 miles northwest of Brazil's major consumption centers on the Atlantic coast.

So, Petrobras planners are studying two ways of reaching local outlets: liquefying gas for shipping by tanker down the Solimoes River to Manaus and building a 400-mile gas line across the western Amazon region to supply Porto Velho.

In addition to making the Amazon region self-sufficient in gas, the reserves permit construction of gas-fired plants to generate electricity. Energy self-sufficiency has long been an elusive goal for Brazil, which has the largest Latin American economy.

In 1953, an American geologist reported the Amazon region lacked oil, and to prove him wrong, Brazil's government created a state monopoly by reserving oil exploration and production for Petrobras.

But almost four decades after the streets of Rio de Janeiro rang with the nationalist cry ``O petroleo e nosso'' - ``The oil is ours'' - Brazil produces only half the 1.3 million barrels a day that it needs. Drained of capital by politicians, the company postponed in the late 1980s a self-sufficiency program and cut its drilling rigs to 25 in 1989, from 79 in 1986.

Recently, the price of continued dependence on imports has become critical for Brazil. Gyrating oil prices because of the Persian Gulf crisis pushed Brazil's oil import bill up 14 percent in September, to $512 million.

Unwilling to undermine a wider fight against inflation, Brazilian President Fernando Collor de Mello has increased gasoline prices five times since August, but not by enough to prevent the state company from losing $13 million a day in recent weeks.

Tension over the price of imported oil blew up in public Oct. 19 when Petrobras President Luiz Octavio da Motta Veiga resigned, charging angrily that the government was squeezing the company to avoid a surge of inflation. His replacement, Eduardo Teixeira, promised to cope with high oil prices by cutting costs.

Teixeira, a free-market economist, startled many Brazilians by proposing a long-term solution: ending the company's monopoly, which under Brazil's 1988 constitution encompasses exploration, production, refining, importing and exporting. …