Petroleo Brasileiro SA, Brazil’s state-controlled oil company, leased about 80 percent of the world’s deepest-drilling offshore rigs to explore prospects including the Western Hemisphere’s biggest discovery in decades.

Petrobras, as the Rio de Janeiro-based company is known, is hiring rigs that can drill in at least 3,000 meters (9,800 feet) of water, Chief Executive Officer Jose Sergio Gabrielli said in an interview last week. The world has 21 such vessels, according to Rigzone.com, which tracks the offshore drilling industry.

The company’s “insatiable” demand is forcing producers including Exxon Mobil Corp. and BP Plc to pay more as they compete for the remaining units, said Kjell Erik Eilertsen and Truls Olsen, analysts at Fearnley Fonds AS in Oslo. Explorers that don’t have rigs under contract may delay projects or pay rents of more than $600,000 a day.

“The oil majors have their backs against the wall as Petrobras has aggressively locked up significant rig capacity,” said Omar Nokta, head of maritime research at Dahlman Rose & Co. in New York.

Petrobras is negotiating for as many as 17 more vessels to probe the Tupi discovery and neighboring fields, said Bill Herbert, an analyst at Simmons & Co. International in Houston. The company already controls almost seven times as much capacity as the next biggest user of rigs that can drill in 7,500 feet of water, according to research by Dahlman Rose.

Auctions Suspended

Brazil is suspending auctions of new exploration blocks until at least 2009 because the industry lacks the equipment needed to expand, Mines and Energy Minister Edison Lobao said today in an interview. Producers need to start work on the leases they already have before Brazil can contemplate a new sale or revive a stalled auction, he said.

U.S. and European oil companies probably will pay $50,000 more per day to lease deepwater rigs during the next three years because Petrobras has already contracted for so much of the worldwide fleet, Nokta said. Such units are designed to cope with high seas and hold equipment needed to bore beneath the seafloor and identify oil and gas deposits as much as 6 miles below the ocean surface.

Exxon Mobil, the world’s biggest oil company, plans to begin drilling a Brazilian prospect known as BM-S-22 in the third quarter with a Seadrill Ltd. rig in 2,100-meter seas. New York-based Hess Corp. and Petrobras own stakes in the project.

Exxon Mobil, BP

Record oil prices and cost cutting have made up for rising drilling expenses, Exxon Mobil spokesman Henry Hubble told investors on a May 1 conference call. First-quarter profit climbed to $28.62 per barrel of oil equivalent produced from $23.27 a year earlier. Irving, Texas-based Exxon Mobil doesn’t disclose how much it spends on rigs.

London-based BP had profit of $21.42 per barrel produced in the first quarter, up from $13.25 a year earlier. The company discovered oil last month 31,150 feet below the surface of the Gulf of Mexico in a prospect called Kodiak. BP doesn’t report drilling costs.

“There’s more demand than there are available rigs,” BP spokesman Daren Beaudo said. “We expect that over the next couple of years, the rig count will return to balance.”

At Petrobras, net income per barrel jumped 88 percent to $18.24. The increase outpaced the gains of 23 percent at Exxon Mobil and 62 percent at BP.

Rig Contracts

Petrobras has signed leases this year for six deepwater rigs, more than twice as many as any other producer, according to Dahlman Rose. The contracts have an average duration of five years and four months at rates of $410,000 to $580,000 a day.

Exxon Mobil leased Seadrill’s West Polaris unit last month for $600,000 a day, Nokta said. BP agreed on May 1 to pay $540,000 a day for a Pride International Inc. drillship, $60,000 a day more than the company committed to three months earlier for an identical Pride rig, he said.

Petrobras plans to start pumping oil in the first quarter of 2009 from Tupi, the biggest find in the Americas since Mexico’s 1976 discovery of the Cantarell field in the Gulf of Mexico. Petrobras also is evaluating as many as seven nearby fields, including the Carioca prospect, Gabrielli said.

It will take at least a year of additional drilling for Brazil to get a good picture of how much oil there is in an offshore region that includes Tupi, Carioca and other fields, said Lobao, the government minister. Petrobras and other producers have drilled only 15 wells in the region, he said.

Share Gains

Petrobras rose 17 centavos to 46.47 reais in Sao Paulo and has climbed 32 percent since announcing the Tupi discovery in November, quadruple the gain by major U.S. oil companies.

CEO Gabrielli, 59, said Petrobras began signing multiyear drilling leases as far back as 2004 because it foresaw a shortage of deepwater vessels.

“We could get very good deals at that time,” Gabrielli said. “We moved some of our contracts from $70,000 a day to $250,000 a day, which seemed like a very large increase back then, but now, of course, drilling rigs are $600,000 and $700,000 a day.”

Petrobras is in talks with Transocean Inc., the world’s biggest offshore driller, to extend leases as much as three years ahead of expiration, Robert Long, chief executive officer for the Houston-based contractor, said last week.

http://www.bloomberg.com/apps/news?pid=20601109&sid=

Related Content

Subscribe to the post comments feeds or Leave a trackback