[OFFSHORE TECHNOLOGY CONFERENCE] Discoveries mean opportunity for U.S. companies. PETROBRAS, Brazil's oil potential requires more rigs

PETROBRAS is in a "very good position" after making huge deep-water oil discoveries off Brazil in recent months, the top executive of Brazil's national oil company said Tuesday. But it may need to start building its own deep-water drilling rigs or form a strategic alliance to get more rigs if the company is to unlock the potential of its vast offshore fields, PETROBRAS CEO Jose Sergio Gabrielli De Azevedo said during a news conference at the Offshore Technology Conference in Houston.

"We have to think about nontraditional ways to get those critical resources, because in the next several years we will need a lot of drilling rigs," Gabrielli said.

The prediction comes after PETROBRAS said late last year its Tupi field in the Santos Basin may contain up to 8 billion barrels of oil and natural gas, an amount that could boost the country's reserves by more than 50 percent.

Recently, it looked like Petrobras had made an even bigger find, when Haroldo Lima, head of Brazil's National Petroleum Agency (ANP), said the company's deep-water Carioca field could hold up to 33 billion barrels of oil.

But PETROBRAS officials have not confirmed that figure, and Gabrielli again declined to comment Tuesday. The discoveries mean there could be a big opportunity for U.S. companies that provide rigs, services and equipment to the offshore oil and gas industry, some of which are exhibiting this week at OTC at Reliant Park.

"All indications are that the opportunity will be great," said Ricardo Monico, general manager of Brazil for Cameron, a Houston company that makes subsea drilling systems.

The Tupi field alone could require installation of about 600 subsea "trees" that regulate the flow of fluids at the wellhead, roughly double the number of trees in all of Brazil's offshore fields today, he said.

And Cameron, whose business is rapidly growing with Petrobras, hopes to get more of the work, Monico said.

So, too, do Houston-area drilling contractors like Transocean, Pride International, Noble and Diamond Offshore, which own the lion's share of the small number of specialized floating rigs needed to operate in Brazil's deep waters, and oil field service companies like Halliburton and Schlumberger that offer technical know-how for drilling in harsh environments.

PETROBRAS is well-liked among its suppliers because it is open to new ideas and willing to experiment with different technology, said Chuck Chauviere, president of Hydril, a maker of high-tech pressure-control products used in offshore drilling that was purchased by GE Oil and Gas in April.

"If new deep-water technology is going to be developed, Petrobras is one of the companies who will do it," he said.

But the company still needs drilling rigs to harvest the oil and natural gas deep below the seafloor off Brazil. Gabrielli said the company has not decided whether it will enter the rig-building business but pointed to its entry into ship hull building when it needed more FPSO vessels to produce oil and gas.

In Brazil, Petrobras has been a pioneer of the FPSO, or floating production storage and offloading ship, and recently won a preliminary approval to bring the first one to the Gulf of Mexico.

PETROBRAS now produces 2.3 million barrels a day of crude oil, enough to meet the energy needs of Brazil and still have some left over. The company expects to reach 3.2 million barrels a day by 2012 and 4.2 million barrels per day by 2015, Gabrielli said.

The company also plans to expand its oil refining capacity from 1.9 million barrels a day to 3 million barrels a day by 2015.

Petrobras could decide as early as Friday if it will buy Valero Energy Corp.'s 275,000-barrel-per-day refinery in Aruba, said Paulo Roberto, director of PETROBRAS' downstream division. He was also in Houston on Tuesday for the OTC.

The company's board is scheduled to meet Friday and will discuss whether to move forward buying the facility, but "we are not committed to make a decision," Gabrielli said.

In November, Valero said it was exploring strategic alternatives for its Aruba plant, estimated to be worth upwards of $4 billion. Valero also is trying unload refineries in Memphis, Tenn.; Krotz Springs, La; Ardmore, Okla.; and Lima, Ohio, which it already sold.

Bill Day, a Valero spokesman, would not confirm Tuesday whether PETROBRAS is a possible buyer for the Aruba plant. But the company expects to have a transaction on Aruba by the end of the second quarter, he said.

PETROBRAS is also in negotiations to increase its stake in a refinery in Pasadena at the Houston Ship Channel, Gabrielli said. Now a 50 percent owner with Astra Oil, PETROBRAS is said to be considering full ownership of the 100,000-barrel-a-day plant, as well as an expansion that would double its size. But company officials would not elaborate on negotiations.
OFFSHORE TECHNOLOGY CONFERENCE: Discoveries mean opportunity for U.S. companies. PETROBRAS, Brazil's oil potential requires more rigs

Source: The Houston Chronicle| By BRETT CLANTON

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