Brazil girds for massive offshore oil extraction
Monday, December 7, 2009
Everything about the shipyard here is colossal -- the 4,000-man workforce, the billions sunk into it in capital costs, the half-finished 10-story-high production platforms.
But then, so is the challenge facing Brazil's state-controlled energy company, Petrobras: developing a group of newly discovered deep-sea oil fields that energy analysts say will catapult this country into the ranks of the world's petro-powers. The oil pools are 200 miles out in the Atlantic and more than four miles down, under freezing seas, rock and a heavy cap of salt.
Petrobras, which until recently was little known outside oil circles, has launched a five-year, $174 billion project to provide platforms, rigs, support vessels and drilling systems to develop tens of billions of barrels of oil. Energy officials here project that Brazil -- still an oil importer five years ago -- will in the next decade have one of the world's biggest oil reserves.
"It's going to change the role of Brazil in the geopolitics of oil," Petrobras's president, José Sergio Gabrielli, said in an interview at the company's headquarters in Rio de Janeiro. "We are going to become a much bigger producer."
Petrobras estimates that production in Brazil could reach 3.9 million barrels by 2020, up from more than 2 million a day now. Proven oil reserves would rise from 14.4 billion barrels to more than 30 billion barrels, according to government estimates, putting Brazil in the same league as such major oil exporters as Qatar, Canada, Kazakhstan and Nigeria.
The new discoveries in Brazil's offshore "pre-salt" region do not mean that the country will become a major exporter of crude, according to Gabrielli. He noted that Brazil's economy, which is the world's eighth-largest and is steadily growing, is expected to consume much of Petrobras's projected production. But, he added, as the country meets its own needs, it will also develop for export refined products such as gasoline, diesel and biofuels.
In an era of drum-tight supply, the discoveries off Brazil's coast and Petrobras's growing stature are changing the world's oil balance, because few regions outside the OPEC countries are expected to generate significant growth in crude production, said Michelle Billig Patron, senior director of political risk for the New York-based Pira Energy Group.
"There is really only Canada and Brazil when you're talking about a million barrels a day more in growth over the next 10 years," Patron said.
A firm hits it big
The engine of that growth is a multinational that, for much of its 56-year history, was little more than a trading company. It pumped a few thousand barrels a day almost as a side note to its real function, overseeing oil imports. Then in 1974 -- a time when oil shocks had alarmed Brazilian officials -- came a major discovery: the offshore Campos Basin, east of Rio.
"Petrobras, before Campos, produced 180,000 barrels a day," said João Carlos de Luca, a former Petrobras executive who is president of the Brazilian Petroleum Institute, which represents foreign oil companies here. "After Campos, it was a company that searched for self-sufficiency in production."
In its drive to produce, Petrobras became a leader in offshore production. The Rio-based company is now responsible for more than a fifth of the world's deep-sea operations, more than any other company, Gabrielli said. It operates in 26 countries and drills off the African coast and in the Gulf of Mexico.
With a market capitalization of more than $220 billion, Petrobras is one of the world's 10 biggest companies. Over the past two years, it has been the most frequently traded foreign company on the New York Stock Exchange, trade data show. Among investors bullish on Petrobras is George Soros, who last year made the oil company the largest single holding in his investment fund, according to Bloomberg.