ENERGY | Petrobras to play a pivotal role in oil exploration

Lloyd’s List | 2010.10.08

BRAZILIAN waters will play an increasingly important role in the offshore business, as the “pre-salt” oil fields in the Campos and Santos basins are exploited.

Petrobras has recently been in the news with its massive $70bn equivalent stock sale, in which approximately $43bn is being taken up by the Brazilian government. The state is in effect paying for its shares by granting Petrobras the right to develop some 5bn barrels of oil found in the pre-salt formations, particular in the Santos Basin.

With new rules implemented concerning offshore resources, coinciding with Petrobras’s capital raising effort, Petrobras (with government ownership now increased) will now play a pivotal role in oil exploration. An important change will see Petrobras as the lead operator in any exploration syndicate that may be formed. The concession system will give way to production-sharing agreements, with the government dictating which firms might gain licenses to explore for and, if successful, to produce oil.

Even before the financing, Petrobras was set to dominate the offshore rig and boat businesses, with $33bn budgeted for pre-salt exploration and production in its latest five-year capital plan. By now, the construction of 28 rigs is a well-known bullet point in presentations regarding its five-year plan, stretching out to 2014.

The oil giant’s equipment programme also includes plans to arrange for construction of 146 supply boats, with an emphasis on local content. Under the new capital plan, local owners will build the vessels at Brazilian yards. Typically, local yards have partnered with more experienced builders, from Asia or Europe.

Recently announced transactions illustrate the dynamics of such deals. Norskan Offshore, a Brazilian-headquartered subsidiary of the Oslo-listed DOF, has built up a fleet of 12 vessels since entering Brazil 10 years ago. It has now announced deals to build three additional anchor handler tug supply vessels, based on plans from STX Offshore Design. According to market reports, the three vessels, of the AH 11 design, will be built at the STX Brazil Offshore yard, in Niteroi, which was already set to build four vessels (two AH 11 and two AH 12) for Norskan.

The yard is owned by STX Norway Offshore jointly with a Brazilian equity investor PJMR Empreendimentos. Petrobras has recently announced that it will take four of the vessels, with deliveries set for 2011 through to 2013, on eight-year charters.

Sister yard STX Europe is building vessels for another owner, K Line Offshore. KL Brevikfjord, a platform supply vessel (PSV) of the CD 06 design, was delivered from the builder’s Brevik, Norway, yard and is set to begin a four-year charter (with an optional four years) to Petrobras.

By mid 2011, K Line Offshore will be taking an additional three PSVs from STX, in addition to a further two AH 12 design anchor handlers.

The recent money raise has the pundits buzzing, questioning both the financial and operational wisdom of the “shares for oil” deal. Brazil became a net oil exporter several years ago; ultimately, it will be an even bigger exporter.

Political risk analysts Eurasia Group wrote in a late spring article that, in spite of technical challenges of getting to pre-salt oil, “Brazil is advancing full speed ahead, and its plans have broad public and political support”.

Eurasia Group notes Brazilian regulators will be looking closely at safety issues in the wake of Deepwater Horizon, but points out that Brazil’s National Petroleum Agency is “likely to limit the cost of new regulatory burdens to ensure plans move forward without unnecessary delays”.

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