FEATURE
OFFSHORE BRAZIL
Brazil
By Matt Gresham
A New Day Dawning in the Offshore Sector
The Trico Mystic, a GPA 640 PSV built by Bender Shipbuilding and owned by Trico Marine, heading to Brazil.
One year ago, global oil prices quickly rose, topping $100 per barrel in April of 2008. The cost for a barrel of oil continued its climb over the next several months - averaging above $130 by July and peaking at $147.30. Some analysts predicted $200 per-barrel oil at the time, others deemed the price inflated and called for calm. Then, as quickly as oil prices spiked, they crashed below $30 amid news of a global recession and now a far-reaching worldwide economic downturn. In late March, the U.S. Energy Department reported the U.S. crude oil supply at a 16-year high of 356.6 million barrels - up more than 15 percent from a year ago. Higher supplies amount to falling rig counts, a six-year low for domestic activity, including a sobering 43 offshore drilling rigs in U.S. waters. The dramatic slip in domestic production could hinder President Barack Obama's plan to downsize the nation's dependence on foreign crude, analysts say. Combined with potential federal oil
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and gas tax hikes, natural disasters such as hurricanes -- and falling prices, some industry personnel don't see a bright future in the near term for domestic offshore activity. Joe Bennett, a spokesman for New Orleans-based Tidewater Inc., said the world's largest offshore vessel company has little reason to invest in the Gulf of Mexico right now. "We're down to about 20 to 25 boats working in the Gulf," Bennett said. "Quite frankly, the outlook in the Gulf of Mexico isn't very rosy. There's no reason to build a presence given the current and predicted activity." Instead, domestic companies are investing in overseas markets, such as Latin American nations, namely Brazil, which is now Tidewater's second-largest customer next to Chevron Corp. The effort to better relations with Latin America and begin to lure domestic exploration and production back to the U.S. could begin this month, as President Obama meets with the 33 democratically-elected leaders of the Western Hemisphere during the fifth
Summit of the Americas on April 17 in Trinidad and Tobago. Topping the summit's theme: energy security. The United States' relationship with Brazil has grown in importance in recent years, as foreign policy makers see the nation as a counter to the region's Venezuelan influence. Venezuela produces about 2.35 million barrels per day in a region that provides the U.S. with a third of its oil. According to energy experts, Brazil, Colombia and Trinidad are the Latin American markets with the best forecasts in the near-term. However, many point to Petrobras, Brazil's national energy company as the leader moving forward. "Petrobras and Brazil have a clear vision and objective looking to the future, whereas many oil companies today are not investing in exploration and development with $35 oil prospects," said Jorge Pinion, an energy fellow at the University of Miami. "In the next 12 to 18 months, I believe we'll see oil prices rebound and long-term we'll see oil return to $75 per barrel. Now is the time to begin the
exploration and development process, so when prices rebound, companies like Petrobras are ready to take advantage of that recovery." Pinion said Brazil is uniquely positioned for long-term success, which begins with vast oil and gas reserves he estimates at 18 billion barrels. "As a national oil company, Petrobras is a very competent company," Pinion said, "probably the best out there, along with Norway." Brazil, with a population of 180 million and the 10th largest economy, is already the world's biggest exporter of iron ore, chicken, beef, coffee and sugar. The nation also produces 1.9 million barrels of oil per day and could significantly grow that number when new reserves are brought online. Recent announcements by Petrobras CEO Jose Sergio Gabrielli of massive investments signal the company and the nation hope to make the commitment to improve those numbers. Gabrielli told state media the company is moving forward with its $174 billion five-year investment plan through 2013.
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