Oil Price Collapse Could Slash Offshore Drilling Budgets in Brazil by 20%

Marta Nogueira
Wednesday, March 18, 2020

The recent collapse in oil prices could chop $300 million to $600 million off 2020 exploration budgets in Brazil, which has emerged as one of the world's hottest offshore oil plays, specialists at consultancy Wood Mackenzie told Reuters.

Before oil prices collapsed in the wake of failed OPEC talks earlier this month, the consultancy had forecast that some $3 billion would be invested in exploration in Brazil, with state-run Petrobras, Royal Dutch Shell PLC and Norway's Equinor ASA leading the charge.

Petrobras, formally known as Petroleo Brasileiro SA, said it alone planned to invest an average of $2.3 billion per year on exploration between 2020 and 2024.

Those hefty bets come as oil majors rush to claim and develop their share of Brazil's so-called "pre-salt" reserves, a prolific zone off the nation's southeastern coast where billions of barrels of oil are trapped beneath the seafloor.

But Wood Mackenzie is now assuming a reduction of exploration budgets of roughly around 20% across the board, should oil prices remain around $35 per barrel this year.

"I think everyone ... is evaluating what they can do to save money," Marcelo de Assis, the firm's head upstream researcher for Latin America, told Reuters on Friday.

The consultancy noted that Exxon Mobil Corp and France's Total SA are still awaiting exploration licenses, which could make their plans in Brazil easier to delay. 

Equinor is likely to continue developing its Carcara offshore block, the consultancy said, where the Norwegian firm has already declared the zone commercially viable.

Exxon, Equinor, and Total told Reuters on Monday they had made no changes to their plans for Brazil. 

Total added that it had applied for a license from Brazil's environmental authorities in February to begin drilling exploratory wells at the C-M-541 block that it won at auction in October.

Petrobras and Shell did not immediately respond to requests for comment.

($1 = 5.07 reais) 

(Reporting by Marta Nogueira; Writing by Gram Slattery; Editing by Sandra Maler)

Categories: Energy Deepwater Drilling Industry News Activity South America Rigs

Related Stories

Dolphin Drilling and GHL Reach Win-Win Agreement as Blackford Dolphin Continues Work Off Nigeria

ExxonMobil Strikes Oil Offshore Guyana

Aker BP Gets Green Light for Exploration Drilling in North Sea

Current News

First Gas Export to Denmark from Tyra II Expected Today

Vattenfall to Take Part in IJmuiden Ver Offshore Wind Tender in Netherlands

Beach Energy to Let Go 30% of Workforce Amid Strategic Review

Ocean Infinity Inks Deal with Shell for Subsea Data Capture Services

Subscribe for OE Digital E‑News