Report: Brazil poised for sustained ‘heavy drilling campaign’

Offshore drilling and E&P activity is set to ramp up quickly in Brazil over the next four years, according to the latest analysis from Melius Research, a New York City-based investment research and data analytics firm.

Prompting this invigoration of Brazilian E&P are some key changes on the regulatory front, including reduced local content requirements; and reduced Petrobras ownership requirements for offshore leases, which has led to a surge in activity from the international supermajors.

Also spurring E&P activity offshore Brazil is Petrobras’ 2025-2029 plan, which has been “upsized” compared to its 2024-2028 plan. Under the new schedule, Petrobras plans to increase capex spending by 5% to $77 billion. “We anticipate increases in further multi-year plans as they are unveiled,” Melius Research said.

Looking at the global energy market, the firm wrote that “our view [is] that exploration and production spending needs to increase to support current levels of oil and gas production and to meet incremental oil and gas demand.”

The report further noted that with the market for oil “tightening” (a view that it admitted to being “non-consensus”), the release of OPEC quotas is “likely to reveal a market with minimal spare capacity.” Investors tend to focus on inventories when OPEC is holding capacity off the market, the report further noted, “but when spare capacity gets tight the price signal to drill can quickly arrive.”

“Our view is that a paradigm shift is underway; deepwater barrels are replacing shale as the low-cost barrel, positioning offshore activity to increase,” Melius Research said. “This is already unfolding in Brazil where Petrobras has awarded a number of major contracts and is poised for a heavy drilling campaign through the end of the decade.” This is a “clear positive” for the oilfield service companies and downhole service providers, the firm said.

• Baker Hughes: Subsea trees (50), multi-year contracts for stimulation vessels, integrated completions, and orders for flexible pipe. 
• Halliburton: A major offshore drilling contract, and awards for offshore intervention and P&A work. 
• SLB: A large completions contract, a subsea boosting award, a contract for integrated services and equipment awards for the Roncador project. 
• Weatherford: A three-year tubular running services contract.

Petrobras has also awarded numerous contracts to other smaller oilfield service companies, the report added.