Monday, April 27, 2009

Offshore Oil Rigs in Short Supply

Finding offshore oil isn't a problem, but finding offshore oil rigs seems to be...

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, may be hurt by a rig shortage as it begins development of the Tupi field, the largest discovery in the Americas since 1976, according to Jefferies & Co. Inc.

The company expects to almost double the numbers of rigs operating in deepwater offshore Brazil to 68 by 2012, from 38 today, according to Jefferies analyst Jud Bailey.

It’s “questionable” whether six of these rigs can even be built because the contractors are “small marginal´´ players, Bailey said April 24 in an interview from Houston. Others rigs may be delivered as much as a year late, he said.


A drop in oil prices has made it difficult for small rig builders to complete orders as margins narrow, Bailey said. Brazil’s government has also required Petrobras to hire local builders, who are not necessarily capable of building the rigs or don’t have the money to do it, he said. Petrobras would have to step in and “backstop” some of these companies financially to allow them to produce the equipment in time, he said.

“The down side for Petrobras is that the world capital crunch will make it hard for many companies to finance new ships and drill rigs,” Peter Ping Ho, an oil and gas analyst with Planner Corretora De Valores in Sao Paulo, said April 24.

Rio de Janeiro-based Petrobras, whose Tupi field is the largest discovery since Mexico’s Cantarell, is tapping overseas partners to help fund a $174.4 billion five-year investment plan. Chief Financial Officer Almir Barbassa was last week touring Asia to persuade equipment manufacturers and shipbuilders to expand their operations in Brazil.

“The Brazilian government is pushing them to build the rigs in Brazil,” Bailey said. “If they do that there will definitely be delays.”

- Brewskie

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