Worldwide offshore rig utilization moved up slightly this week to 84.1% utilization. This is the first time that weekly utilization has moved back above 84% since mid-summer.
Yet Petrobras is continuing to push for even higher levels of production with the addition of new wells and deepwater floating production vessels. Within the next month, four more wells will be tied back to the P-50 FPSO increasing its production to 180,000 bpd. Additionally, the 60,000 bpd P-34 platform and the 100,000 bpd Cidade do Rio de Janeiro FPSO are slated to begin production before the end of 2006. These additions should push Petrobras' production capacity over 2 million bpd.
With estimated oil reserves of just over 15 billion barrels, Brazil has the world's 17th largest proved oil reserves. This places Brazil only slightly behind the United States (22 b/bbl) and China (18 b/bbl) in terms of reserves, but still well behind both of these countries in terms of production. Yet, unlike the US and China, Brazil has reached oil self-sufficiency this year, with production surpassing national consumption of 1.8 m/bpd. At those levels, Brazil has enough oil to provide for itself for 20 years.
Deepwater Drilling Demands
Since the early 1990s, when there were fewer than 20 rigs in the region, Brazil has grown steadily into a major consumer of semisub and drillship rig time. It is interesting to note that Brazilian rig demand has generally gone against the overall trends for semis and drillships worldwide. While worldwide demand grew steadily from early 1994 to late 1997, Brazilian rig demand fell and held steady near 23 to 24 rigs contracted, the lowest number of rigs working there at any time since 1991.
Worldwide semisub utilization then peaked in late 1997, and declined steadily for more than two years before beginning a strong rebound in 2000. During that time, Brazilian demand for semis and drillships increased almost 60%, rising from 27 rigs contracted in late 1997 to 42 rigs contracted in the third quarter of 2000. With utilization declining during this period, Petrobras was able to secure these rigs at generally more favorable rates.
When worldwide semisub and drillship demand began recovering again in 2000, the number of rigs working offshore Brazil began a quick decline, dropping from 43 to 32 rigs in less than 18 months. Since then, the number of rigs has declined slowly to its current level of 28 rigs under contract.
Longer for Less
Thanks in part to these longer contracts, semisubs and drillships working offshore Brazil are earning significantly less than their counterparts in other areas of the world. The average day rate for these rigs working in Brazil is about $130,000 per day, the lowest of any region with more than 10 semis and drillships. That is about 31% lower than the worldwide average of $189,000 per day, and it is about 47% lower than the average of $244,000 being paid to semis and drillships in the US GOM, the world's highest paying region. By locking rigs into longer contracts years back, Petrobras is saving itself nearly $1.5 million per day on the 26 rigs that it has contracted when compared to what the operator would be paying if rigs were contracted at the worldwide average rate for these rigs.
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