Petrobras to double spending, leases six rigs

Aug. 8, 2006
Brazil's state-owned oil company Petroleo Brasileiro SA (Petrobras ) expects to double exploration expenditures over the next 5 years compared with the past 5 years, said Petrobras Pres. José Sérgio Gabrielli. Exploration expenditures, he said, will increase to $7-8 billion/year through 2011, up from an average of $2.5-3 billion/year during the past 5 years, and he added that the focus of expenditures will be on Brazilian companies.

Peter Howard Wertheim
OGJ Correspondent

RIO DE JANEIRO, Aug. 8 -- Brazil's state-owned oil company Petroleo Brasileiro SA (Petrobras) expects to double exploration expenditures over the next 5 years compared with the past 5 years, said Petrobras Pres. José Sérgio Gabrielli. Exploration expenditures, he said, will increase to $7-8 billion/year through 2011, up from an average of $2.5-3 billion/year during the past 5 years, and he added that the focus of expenditures will be on Brazilian companies.

"Of the $87 billion [total expenditures] that will be invested by the company until 2011, at least $50 billion will be purchased from Brazilian companies," he said, noting that contracting domestic companies was part of the Petrobras' philosophy of increasing national content in all of its projects.

$4.5 billion for rigs
The company has begun its program by signing leasing contracts totaling $4.5 billion with Brazilian companies for six drilling rigs. Companies include Construtora Norberto Odebrecht SA, Petroserv SA, Queiroz Galvão Perfurações SA, and Schahin Engenharia Ltda.

Four rigs capable of drilling in 2,000 m of water will be leased from Queiroz Galvão, Odebrecht, Schahin, and Petroserv. These are being contracted for 7-year periods, beginning in 2010 and renewable for another 7 years. Two other rigs, capable of drilling in 2,400 m of water, will be leased from Queiroz Galvão and Schahin for 5 years, starting in 2009. Petrobras said that some of the rigs could be mobilized to drill in water as deep as 3,050 m.

Petrobras's Exploration and Production Director Guilherme Estrella emphasized the decentralization of contracts these awards represent. Of 23 rigs now chartered by the company, he said, 19 are with four international firms—Transocean Inc., Pride International Inc., Noble Drilling Corp., and Diamond Offshore Drilling Inc.

Petrobras, however, will not require minimum national content for the construction of the new rigs, because Brazilian yards are booked up, and the rigs might have to be built in Singapore or South Korea. But the company said that Brazilian manpower would comprise 90% of the operating phases, with that percentage gradually increasing to 100%.

The increased price of chartering drilling rigs has contributed most to the jump in exploration costs, with rigs representing as much as 80% of the cost of an exploration campaign. However Estrella said that signing long-term contracts for the rigs has reduced its leasing fees, which he said are 20% lower than those on the international market.