Even before the discovery of the vast presalt resources, Brazil was one of the world's leading deepwater provinces. The discovery of the presalt resources, starting with the Lula (previously Tupi) field and continuing with fields such as Cernambi, Guara, and Libra, will not only massively impact Brazilian oil production and its economy but also change the worldwide deepwater supply chain as deepwater technology is deployed at previously unprecedented levels. This development also will challenge the supply chain for deepwater offshore oil and gas equipment and services in Brazil and worldwide.

Deepwater exploration programs in Brazil are focused predominantly in the Campos, Santos, and Esp?rito Santo basins. Currently more than 80% of development drilling occurs in the mature Campos basin where large developments in Marlim, Marlim Sul, Roncador, and Albacora have been producing for many years. Since the discovery of the giant Tupi field in 2007, the Santos basin has become Brazil's most highly explored basin, accounting for nearly 60% of all exploration and appraisal drilling.

While Petrobras continues to be the most active operator in deepwater Brazil, notable supermajors such as Chevron, Shell, and ExxonMobil have been active in the region for many years. In 2011, BP entered the market with the acquisition of Devon Energy's properties, and Total announced its intention to become more active in the region in coming years. Independent operators with active or planned drilling programs near-term include Anadarko, Karoon, Vanco, and the new Brazilian super-indie OGX. Deepwater Brazil opportunities also have attracted a number of national oil companies from around the globe, including ONGC, Sonangol, Statoil, and Repsol.

In April 2011, Brazil's Ag?ncia Nacional de Petr?leo (ANP), announced plans to hold the 11th licensing round, which is expected to take place before year-end. Operators have been waiting since 2009 for this highly anticipated offering, which will include 87 offshore blocks, the majority of which are classified by ANP as new frontier areas.

Brazil has become the dominant region in the world for deepwater rig deployment. (Images courtesy of Quest)

Floating rigs

Brazil has become the dominant region in the world among the areas for deepwater rig deployment, with roughly 30% of all contracted floating rigs. As of August 2011, there were 67 floating rigs under contract in Brazil. Among the rigs working (58), roughly 60% were drilling exploration or appraisal wells. More than 80% of the rigs are under contract with Petrobras. Other operators with rigs in the region include OGX, BP, Chevron, ExxonMobil, Statoil, Shell, and Starfish O&G (Sonangol). By the end of 2012, an additional 17 rigs are expected to be added to the fleet through new-build deliveries, all of which have been contracted by Petrobras. This does not take into account the massive in-country 28-rig newbuild program that Petrobras has under way, which will see the first of seven newbuilds delivered in 2015.

By 2013, deepwater drilling demand in Brazil is expected to grow by as much as 30%, while current contracted rig supply only increases by 15%. Quest predicts a flurry of additional rig contracts to be awarded over the next 12 months.

Subsea market

Over the past decade, the subsea market has represented more than 20% of global subsea tree demand. A leading indicator for overall subsea demand, this tree award trend illustrates the importance of the region and the oil companies executing deepwater developments. This demand trend increased in the last five years of the previous decade, growing from 13% from 2001-2005 to more than 28% in the last five years. Multiphased mega-projects have dominated the deepwater subsea market off Brazil, leading to its dynamic market growth and elevating Brazil to be one of the world's top drivers for subsea technology. Quest projects significant demand growth from the prolific presalt plays as well as the continuation of the development of the region's conventional subsea projects.

Brazil is one of the world’s top drivers for subsea technology.

Presalt discoveries

The impressive presalt discoveries made in recent years bode well for Brazil in terms of oil and gas supply to the country and subsequent exports. The reservoirs being tapped are considerably higher pressure than previous discoveries, which will increase the technical requirements of the subsea equipment being deployed.

The Brazilian floating production market, which has historically been dominated by floating production, storage, and offloading (FPSO) units and semisubmersibles, already has seen increased demand for units. The bulk of the 25% increase seen in 2009-2010 compared to 2007-2008 is units destined for the presalt area.

Historically, Petrobras has occasionally used small floating production units to perform extended well tests, primarily on projects in new geologic provinces or frontier areas. With presalt considered the most important new geologic province discovered in Brazil, Petrobras has implemented a consistent policy of running extended well tests by using small FPSO units with approximately 250,000 bbl of storage and 20,000 b/d production capacity. Most of the units are sourced from outside Brazil and are relocated after roughly one year of duty, testing one to two wells on each field. A drop-off in orders for these units is anticipated as the Petrobras fleet reaches an appropriate size.

After well testing, Petrobras is deploying pilot production systems onto fields using data gathered in the well testing phase to prioritize deployment. These units typically have 1 MMbbl of storage capacity and 100 b/d production capacity, employing around 10 trees. Such units have not yet been relocated, but the expectation is that they will be moved when the full-sized production units are delivered. These units have been contracted in a mix of ways, with some owned by Petrobras but the majority being taken on lease from a floating production contractor. SBM Offshore and MODEC have been the most active in this sector, with units built at least partially if not entirely in Asia.

For full-field developments, Petrobras has standardized large newbuild FPSOs with storage capacities of 1 MMbbl and production capacities of 150,000 to 175,000 b/d of oil. Although none of these units is in production yet, they are expected to come online in 2013 and receive initial production from about 20 wells each. These units likely will be entirely constructed in Brazil.

The first major order of this type was to the Engevix/ GVA consortium. This award for eight hulls foresaw units being built two at a time in the Rio Grande South yard. As this consortium lacks experience delivering units of this type, Petrobras will have to be highly involved in the process if delivery schedules are to be met. Further orders for full-field production units likely will be built across Brazil by a variety of contractors. Capacity issues driven by a lack of viable yard space and contractors could either hinder the presalt's development or push orders overseas if local content requirements could still be met.

Fling

Perhaps most intriguing from a floating production perspective is the possibility that Petrobras could deploy floating LNG (FLNG) production ships to monetize the vast gas reserves found in the presalt fields. While Petrobras initially used long export lines to transport gas back to the Brazilian coast for domestic consumption, the company has shown some interest in FLNG technology, with various consortia currently conducting FEED studies on the possibility of deploying an initial unit to be centered on the Lula field. An order is possible in 2012, and while the use of this technology would be more expensive than the pipeline solution, it also could allow Petrobras to export gas once the Brazilian market was properly supplied.

Exploration and development drilling constitute 83% of activity offshore Brazil.