A Snapshot of Brazil

- A Snapshot of Brazil

Friday, August 19, 2011
Rigzone Staff
by Trey Cowan

Brazilian offshore drilling activities are faring much better than worldwide operations. Total average utilization for Brazil's mobile offshore drilling fleet is 94 percent, which compares quite favorably to the global average of 80 percent. Similarly, average dayrates are much higher in Brazil than compared to the rest of the world. Currently, rigs (i.e. drillships, jackups, and semisubs combined) are garnering rates in the high-$310s while global average dayrates are in the mid-$230s.

The favorable disparity for both operating efficiency and dayrates is due largely to fleet mix. Most of the rigs operating off the coast of Brazil are exploring for oil in deeper waters. Hence, very little drilling in the region is accomplished using jackups; which typically command the lowest dayrates in the industry.

Brazil's semisub fleet utilization (a regional fleet of 52 competitively marketed rigs) is 98 percent, quite high by industry standards. Its drillship fleet, while much smaller at 17 marketed rigs, will continue to grow as newbuild equipment is delivered into the region. The jackup fleet is the smallest of the mix with just three competitive rigs on lease in the region. All three are currently under contract. Given the vast quantity of Brazil's discoveries, demand for offshore rigs shows only signs of growing as the country looks to further tap its ample reserves.

Recent News From the Region

• Pacific Drilling announced that its ultra-deepwater drillship the Pacific Mistral has been awarded a three-year contract by Petróleo Brasileiro S.A. (Petrobras) for operations in Brazil. The contract is expected to commence in the fourth quarter of 2011. Estimated maximum contract revenues, including mobilization and client requested modifications, are approximately $536 million.
• Rockhopper recently completed interpretation of its fast track new seismic data in PL032 and PL033. Seismic data shows that the Sea Lion Main Complex ("SLMC") will extend to the south and a new high case area extends over 90km2. Also, two new fan prospects were identified within the new seismic data, Casper and Kermit. Following completion of drilling operations on well 14/10-6, Rockhopper is committed to drill three further wells using the Ocean Guardian.
• Petrobras has commenced production from the P-56 platform at the Marlim Sul field in the Campos Basin. The unit began production through well 7-MLS-163HPRJS and will potentially generate around 16,000 bopd. The P-56 platform, installed in a water depth of 5,479 feet (1,670 meters), is designed to handle up to 100 Mcf/d when it reaches maximum capacity. This is expected to take place in the first quarter of 2012.
• The Sevan Brasil, which is under construction at Cosco Shipyard in China, is on schedule to be delivered during the first quarter of 2012. Upon delivery, the rig will set sail for Brazil to begin its six-year contract with Petrobras.

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Barclays: Worldwide Spending to Pass Half Trillion Mark in 2011

- Barclays: Worldwide Spending to Pass Half Trillion Mark in 2011

Monday, June 13, 2011
Rigzone Staff
by Karen Boman

Worldwide exploration and production (E&P) spending in 2011 is expected to rise to 16 percent to $529 billion, compared with $458 billion in 2010, with strong year-over-year improvement in spending driven by large increases inside and outside North America, Barclays Capital today reported in its global E&P capital spending update.

E&P spending in North America is now forecast to be up 16.2 percent in North America and 15.5 percent outside of North America, compared with forecast increases in December 2010 of 11 percent globally, including seven percent in North America and 12 percent outside of North America. Barclays reports budgets have been revised dramatically higher in the U.S. and internationally for U.S. and European based independents, Southeast Asian companies and companies focused on the Middle East.

Spending increases this year will be led by North America, where high oil prices and the continued shift towards drilling in oil and liquids rich plays have resulted in solid growth. E&P capital spending for North America is expected to increase by 16.2 percent from $127.6 billion in 2010 to $148.3 billion in 2011.

Latin America, Europe and the Middle East are expected to be the strongest regions internationally for E&P spending. Petrobras' multi-year pre-salt development offshore Brazil and ambitious plans by Colombian state energy company Ecopetrol are driving the forecast increase in capital spending by Latin American companies, with spending in the region expected to be up 26 percent in 2011 to $65.5 billion from $52.1 billion in 2010, Barclays reported.

Spending increases of roughly 23 percent are anticipated both in Europe and the Middle East, with spending estimated at $39.9 billion this year in Europe and $22.1 billion in spending in the Middle East. India, Asia and Australia spending will be up 15 percent this year to $79.3 billion. Russian spending is expected to rise by three percent to $36.1 billion this year from 2010.

Capital expenditures for North Africa, where the "Arab Spring" of political demonstrations and civil war across the region has affected government and the economy, are anticipated to be down by over 16 percent to $25.2 billion this year due to sizable spending reductions by Egyptian General Petroleum Corp. and National Oil Corporation, as well as a reduction by Sonangol and lower spending for Nigeria National Petroleum Corp. as an election cycle concludes in Nigeria.

The U.S. continues to attract the majority of worldwide E&P spending at 21 percent; however, this percentage has continued to fall each cycle. Internationally, the India, Asia and Australia region absorbs the largest share of spending, which is being driven by large investments by Chinese national oil companies and Southeast Asian companies such as Malaysia's Petronas and Indonesia's Pertamina. In India, ONGC and Reliance are making significant investments in the region.


U.S. and European independents are stepping up spending internationally, with U.S.-based independents now forecasting international spending increases of 23 percent, up from four percent in December, while the European independents are anticipating spending growth of 23 percent versus 12 percent at the end of 2010. "We believe this is in part due to higher oil prices, higher cash flows, new exploration programs, and recent exploration success," Barclays said.

Spending among supermajors is expected to rise by 16 percent this year, led by Total, BP and Shell, compared with average spending growth of eight percent over the past five years. This increase is due to engineering and construction-related spending for several large liquefied natural gas projects, increasing Iraq spending, and increased deepwater drilling, especially in West Africa and Brazil.

While ExxonMobil remains the largest capital spender worldwide for oil and gas this year, Petrobras is quickly catching up; Petrobras and PetroChina may overtake ExxonMobil in spending in the next few years. Ninety percent of the top 20 spenders are expected to increase capital expenditures this year, with the exception of Russia-based Gazprom, which Barclays believes is primarily currency-related due to currency fluctuations in 2012, and Sonangol in Angola.

Barclays noted that the correlation between increased E&P spending and inflation-adjusted oil prices is significant, and expects a higher oil price environment to persist over the next several years driven by accelerating decline curves, continued difficulty finding and developing large reserves, increased demand in emerging markets, and tight spare capacity.

"Based on our view of a continued high oil price environment, we expect 2011 to mark the first year of multi-year double-digit spending growth internationally," Barclays said.

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Commodity Corner: Crude Climbs on Weaker Dollar

Commodity Corner: Crude Climbs on Weaker Dollar

Tuesday, April 19, 2011
Rigzone Staff
by Saaniya Bangee

Crude futures retreated Tuesday's earlier losses as the dollar weakened against foreign currencies.

Light, sweet crude gained $1.03 to settle at $108.15 a barrel. Tuesday marks the last trading session for the May contract.

Reaching as low as $105.50 a barrel, oil prices reversed course soaring in afternoon trading. As the dollar weakened, the euro gained strength on speculation that the European Central Bank will further increase interest rates. Additionally, strong economic data from France and Germany outweighed fears of Greece restructuring its debt. A weaker greenback increases crude's appeal amongst foreign buyers, making it cheaper.

Prices also bounced back from Monday's lows after Treasury Secretary Timothy Geithner assured there was "no risk" that the U.S. government debt would lose its top-tier rating.

Meanwhile in the Middle East, OPEC Secretary General Abdullah Al-Badri said there isn't a shortage of oil in the global market, even after the supply disruptions in Libya. OPEC believes an increase in crude production will not decrease oil prices worldwide.

Likewise, natural gas futures for May delivery rose to two-week highs settling at $4.26 per thousand cubic feet. The 12.4-cent increase came on a surprising surge in the Midwest's heating demand Tuesday. An unusual drop in weather across most of the Northwest and upper-Midwest and unexpected warmth in the south has increased demand for fuel. The intraday range for natural gas was $4.13 to $4.28 Tuesday.

As retail gasoline rose, May gasoline continued to decline, trading down 1.97 cents Tuesday. Futures settled at $3.23 a gallon increasing concerns that fuel costs will hinder economic recovery and decrease demand for motor fuel in the U.S. Gasoline prices peaked at $3.259 a gallon, before bottoming out at $3.198 Tuesday.