Sunday, March 14, 2010

Brazil Takes The Global Lead in Offshore Oil and Gas Exploration

Agencia Estado reports today (in Portuguese) that Brazil is becoming main pole of global oil and gas offshore exploration, taking the lead of the United States. The growth of activity attracts the interest of major oil companies in the world and puts the country ahead of the field production in deep water, defined by the International Energy Agency (IEA) as the main source of growth of world output in coming decades.

We track oil ETFs live here and Brazilian companies that trade on the NYSE here. PBR is up +92% since January 2009

"In terms of deepwater drilling, Brazil will become the most important country in the world," says the chief counsel of expert advice ODS-Petrodata, Tom Kellock. This kind os assessment is confirmed by last week's purchase by the British company BP of the assets of Devon around the world. "BP enters the deep waters of Brazil and strengthens its portfolio," was the title of the statement announcing the deal, which included operations in the Gulf of Mexico and Azerbaijan. BP was the only one among the giants who had no active exploration and production in Brazil.

According to ODS-Petrodata, Brazil currently has 56 drilling rigs sea of oil wells in operation, compared to 68 in the U.S. coast of the Gulf of Mexico region, which attracts most investments in this segment. For the next few years, companies operating in the country will receive 32 new units. In the U.S., it will be only 14.

The timing depends on the pace of orders from Petrobras, which is bidding for 28 high-tech probes for the pre-salt area, with delivery of units for 2014. Before this the company will receive 23 new units, 12 of them for the pre-salt regions. Each unit has a daily cost estimated at about $ 1 million, including rent and supplies. 10 years ago, only 15 rigs drilled wells in Brazilian waters, according to data from Schlumberger, a provider of services for the sector compard to 120 in the Gulf of Mexico. "Today, we compete with Exxon and Shell in the number of exploratory wells drilled," says Guilherme Estrella, head of exploration and production at Petrobras.

This year, says the National Petroleum Agency (ANP), 69 wells will be drilled in the Brazilian coast. The effort is not limited to the activities of Petrobras: OGXwill drill 27 wells in 2010. According to Estrella, the activity puts the country at the forefront for the development of the new frontier of oil: the deep waters. "The IEA says that in 2030 100 million barrels per day will be consumed, of which 60% to 70% are not yet discovered. This volume should come mostly from deep waters. It is a bitter struggle to meet those 60 million barrels."

Other frontiers of exploration are the heavy oil in Venezuela and the oil sands in Canada, where there are large terrestrial activity, and oil in the Arctic. The producers today, as Saudi Arabia and Russia, have focused on onshore. The impacts of this struggle quoted by Estrella can already be felt in the country, where salaries for off-shore workers are higher than on-shore.

All companies are drilling in the hiring process. "Today we have 120 employees. Tomorrow will be a diffefent number," jokes Peccioli Gerson, chairman of Norway's Sevan Marine, which, at the request of Petrobras, destined a probe that would support the company's activities abroad. In addition to jobs, Peccioli believes there is critical mass for equipment suppliers to start operwting in the country already. There are alreadycases, such as Aker Solutions, which last year opened a risers factory (a type of pipe) in Macaé.

The expectation of Petrobras, now, is to attract major the world's major shipyards. It has established that the 28 probes in the bid should be built in Brazil, a demand that brought executives from major industry groups, such as Hyundai and Daewoo to Brazil. Brazilian construction companies that already operate in exploration, as Queiroz Galvão and Odebrecht, also plan to work in the construction of the probes.

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