Brazil's Lula to Announce Huge Offshore Oil Equipment Plan

SAO PAULO, May 26, 2008 (Dow Jones Newswires)

As part of a plan to develop recent oil reserve discoveries, Brazil President Luiz Inacio Lula da Silva Monday will announce a huge order for marine craft and offshore oil drilling equipment, a presidential spokesman said.

The plan will involve massive purchases by state-controlled oil company Petroleo Brasileiro SA (PBR), or Petrobras. The plan will be called the Petrobras Fleet and Support Vessel Modernization and Expansion Program.

Lula will personally announce the program in Niteroi, a suburb of Rio de Janeiro where a number of ship building companies are located.

So far, officials have not unveiled precise financial details of the plan. However, local press reports indicate it could surpass $20 billion.

The plan will involve at least 40 drilling vessels and semi-submersible platforms to operate in deep and ultra-deep waters, Petrobras officials said last week. The company expects to receive the new units by 2017.

Petrobras is also preparing a tender for 24 oil rig support vessels, and will tender for another 122 such vessels in the next six years. All 146 support vessels will be built in Brazil, Petrobras said.

The company's ambitious fleet expansion plans come amid an overheating of the global oil services industry that has led to a price explosion.

Petrobras already has leased almost 80% of all drilling vessels with a capacity to operate in deep waters worldwide, according to local press reports.

The company urgently needs more drilling equipment to explore and produce from its promising new pre-salt oil province off the coast of southeastern Brazil, according to analysts.

The company in November said it estimates recoverable reserves at its Tupi field in the pre-salt area of the Santos Basin off the coast of Rio de Janeiro at up to 8 billion barrels of oil-equivalent.

Oil found in Brazil's pre-salt area lies at a water depth of more than 2,000 meters, and a further 5,000 meters below sand, rock and salt, making production challenging and expensive.

SAO PAULO, May 26, 2008 (Dow Jones Newswires)