State-run Petrobras plans to spend US$102Bn in capex on oil and gas and low-carbon energy, underpinning Brazil’s goal to become the fourth largest oil producer by the end of the decade
Already Latin America’s largest oil producer and ninth biggest in the world, Brazil wants to be a global energy powerhouse. It has plans to increase its oil production to 5.4M barrels of oil per day (bopd) by 2029, making it the world’s fourth largest, and is already a renewable energy leader.
Under its recently announced strategic plan for 2024-2028, state-run oil major Petrobras will spend US$102Bn in capex on oil and gas and low-carbon energy development, with some US$73Bn targeted for pre-salt projects. As recently as November, the Brazilian energy giant achieved record crude outputs of 3.7M bopd.
President Luiz Inacio Lula de Silva sees no incongruity in his pledge to make Brazil a top oil producer and a climate leader. He sees oil revenues funding his country’s clean energy transition and supporting national social programmes. He has vowed to end illegal deforestation of the Amazon rainforest, and Petrobras is leveraging existing and new technologies to produce its oil in a more sustainable way. It wants to lower the greenhouse gas intensity of its production to 15 kg CO2/barrel of oil equivalent (boe), eliminate routine gas flaring, and reduce methane emissions by 70%, all by 2030.
Brazil also has a head start on much of the rest of the world when it comes to renewable energy, which accounts for 83% of the national electricity matrix, according to the Internal Energy Agency. By contrast, the global average is 25%.
And offshore wind power figures strongly in the country’s energy strategy. Brazil is aiming to beef up its status as the fifth largest producer of wind energy by adding offshore wind to its already well-developed onshore wind capacity. Some 98 major offshore wind projects, with a potential total of 232 GW, have been registered with the country’s Environmental Agency.
Brazil sold out
This strong government energy policy is underpinning oil company investment and drilling activity, which in turn is luring offshore support vessels (OSVs) from outside the region at day rates of more than US$35,000.
The Brazilian OSV market is “effectively sold out” said Jens Behrendt, director, Clarksons Brazil. Mr Berendt told delegates at the Annual Offshore Support Journal Conference, Awards and Exhibition in London in February that active vessel utilisation rates for platforms supply vessels (PSVs) was at 97%, while anchor-handling tug supply (AHTS) tonnage is almost as tight, at 93%. Of the 33 vessels in layup, most were built in the 1980s and 1990s, requiring substantial investment to reactivate and upgrade, he said. Currently there are 483 OSVs operating in Brazil, according to Clarksons.
“HOS has taken legal action to preserve its cabotage privileges”
This would mean OSV fleet levels are nearing the record high of 500 that was reached in 2014, according to data released in December by Associação Brasileira Das Empresas De Apoio Maritima (ABEAM).
Brazil has seen a significant increase in investment in its upstream resources from private exploration and production companies since the 2014 downturn. When the report was released in December, ABEAM said 422 OSVs were in operation, 368 of which were under the Brazilian flag. BRAM Offshore, a unit of Edison Chouest Offshore, is the leading operator in Brazil, with 69 OSVs, 62 of which fly the Brazilian flag.
More OSVs needed
And Petrobras is looking to charter more vessels; it has issued a request for interest, which could see 10 PSV newbuilds and 16 subsea newbuilds built by 2028.
Seabrokers reported Petrobras has followed up the award of eight PSV contracts with nine long-term fixtures for oil spill response vessels (OSRVs). All of the contracts are for a firm period of four years, starting in Q2 2024.
Rio de Janeiro-based Posidonia Shipping has ordered two 4,500-dwt PSVs from Brazilian shipbuilder Sao Miguel Shipyard for delivery in May 2024, according to Clarksons.
And OSV demand will continue to be robust in the near term, and should attract international OSV owners to Brazil, which will be required to meet the country’s cabotage laws regarding crew requirements said Mr Matthews.
“The Brazilian OSV market is effectively sold out”
From 2024 to 2027, 22 floating, production, storage and offloading (FPSO) vessels will be commissioned into the Brazilian offshore oil and gas market. Currently, there are 52 FPSOs in operation.
Petrobras reported that one of the newest FPSOs, Marechal Duque de Caxias, departed Yantai, China on 24 February for the Mero field in the pre-salt of the Santos Basin. With a capacity of 180,000 barrels of oil and capability to compress 12 million cubic metres of gas, the FPSO will start operating in September 2024.
Chartered from MISC, the FPSO will increase the Mero field’s installed production capacity to 590,000 bopd.
Mero is the third largest field in Brazil in terms of volume of oil that can be recovered, behind Tupi and Búzios, which are also located in the pre-salt of the Santos Basin. Besides Marechal Duque de Caixas, Petrobras will install another FPSO in Mero in 2025.
Over the next three years, offshore drilling activity in Brazil will grow modestly, from 30 contracted drill rigs in 2024 to 33 in 2027. Rates for ultra-deepwater floaters in the region were priced at US$430,000 to US$475,000 per day at the end of 2023.
The Mexican success story
Changes to the Mexican constitution in 2013 opened the country’s offshore oil and gas market to private and international investment, laying the foundation for “a success story” noted Diego A. Aguilar, chief strategy officer E-NAV Offshore. Mr Aguilar said some 59 licenses were awarded to international oil and gas developers, enabling US$32Bn in investment to date.
One of those international oil developers, Wintershall Dea, which has been in the Mexican Gulf since 2017, calls Zama field one of the world’s biggest shallow-water oil discoveries in the past 20 years.
Its latest success is a major oil discovery in Block 30, Kan Prospect, estimated to contain 200M to 300M boe in place.
Stricter enforcement of cabotage laws that limit ownership of vessels that fly the Mexican flag by the Mexican Maritime Authority have tightened the availability of tonnage in the market. US-based Hornbeck Offshore Services (HOS), which controlled about 60% of the market’s large PSV capacity, has moved its Mexican-flagged assets out of the market because of these cabotage barriers, and has taken legal action to preserve its cabotage privileges.
Mexico is an important market for HOS, which generated US$61.6M in revenues from OSV activities in the country in the first nine months of 2023 — more than twice the revenues it produced during the same period in 2022.
Overall, Mr Aguilar said there were “huge opportunities for OSV owners” in the Zama field and Trio in the Mexican Gulf, with summer rates for OSVs moving upwards to US$45,000-US$55,000 per day.
Deepwater Guyana and Suriname
Meanwhile, Guyana and Suriname continue to draw investment and yield incredible deepwater discoveries. The Guyana-Suriname Basin is estimated to hold 13.6Bn barrels of oil and 32Tn cubic feet of gas.
Major deepwater discoveries in Guyana and Suriname have generated a demand for large PSVs, with day rates like those in Mexico. “Suriname will become as important as Guyana,” said Mr Aguilar.
Colombia offers some opportunity, but it is moderated by political risk, he pointed out.
Rising political tensions with neighbouring Venezuela are increasing risk in Guyana, where vast oil reserves were first discovered by ExxonMobil in 2015. Venezuela is making claim to the Essequibo area of Guyana following an approval of a referendum by Venezuelan voters in December to annex the region, which represents about two-thirds of Guyana’s land mass.
Following the referendum, Venezuelan President Maduro approved the issuance of oil, gas and mining exploration licenses by state oil company PDVSA in the disputed area.
The territorial dispute is now in the hands of the UN’s International Court of Justice in The Hague.
Despite the political tensions, ExxonMobil continues to move ahead with its oil development plans in Guyana. In April 2022, it announced FID for the Yellowtail development offshore Guyana, which was the fourth, and largest, project in the Stabroek Block. Total investment is tagged at US$12Bn, with projected daily output forecast at 250,000 bopd. According to Hess Corp, ExxonMobil’s partner in the Yellowtail development, the Stabroek Block’s gross discovered recoverable resource estimate is more than 11Bn boe.
ExxonMobil, which has five approved projects and another one set for approval in 2024, plans to double its oil production in Guyana to 1.2M barrels bopd by 2027. ExxonMobil is also considering developing a floating LNG (FLNG) facility in the southeast portion of the Stabroek Block and will drill five wells this year to better assess the gas resources.
Other operators, such as TotalEnergies, have announced plans to invest in the region. The French energy major and its joint venture partner, APA Corp, announced the launch of a development study in Block 58 in Suriname. Production from two fields would come from several subsea wells that would be connected to an FPSO. FID on the project is targeted before the end of 2024, with first production by 2028.
Affiliates of vessel owners Kotug International and Edison Chouest Offshore (ECO) have grown their escort tug fleets to support the increased in FPSO activity in Guyana. In June 2023, the 50-m newbuild escort tugs Madam Kalina and A’Rinra joined the fleet of G-Boats, an affiliate of ECO, while Kotug Guyana added three offshore terminal tugs in November to increase its fleet to five to support ExxonMobil Guyana’s offshore operations. The tugs support large crude tankers that are loading oil from the two producing FPSOs in the Stabroek field. Other duties include hose handling, firefighting, and oil spill response, as well as pilot transfer duties in the field.
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