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Petrobras CEO expects oil prices to remain high, as oil giant plans major fleet expansion

Petrobras CEO expects oil prices to remain high, as oil giant plans major fleet expansion

The head of Petrobras predicted Tuesday that oil prices will likely remain high in the coming years, and said the Brazilian state-run oil giant plans to significantly expand its fleet of drilling rigs and other vessels.
Speaking at a gathering organized by the Brazilian American Chamber of Commerce, President and Chief Executive Jose Sergio Gabrielli said the price of oil is being driven by strong global demand and tight supplies, primarily in the Middle East.
That situation, he added, is unlikely to change for four to five years.
"We cannot see why the price of crude would fall," Gabrielli said.
Oil prices rocketed to a record above $139 a barrel late last week, but have eased somewhat since then. On Tuesday, light, sweet crude for July delivery fell $3.04 cents to settle at $131.31 a barrel on the New York Mercantile Exchange.
Gabrielli declined to predict how high prices could rise or even to provide a possible range, because of the market's volatility, which he said is likely to continue: "It's worthless to give a number," he said.
Gabrielli said his company, which is formally known as Petroleo Brasileiro SA, expects to lease 57 new drilling rigs between next year and 2017, with nearly all capable of drilling in water deeper than 2,000 meters.
About half of those rigs are already contracted, while another 28 must still be leased and are expected to start coming online within five years. Gabrielli said the company will require that the 28 be built in Brazil.
"We know this is going to impact the sector worldwide," he said. "We are giving the industry five years to prepare."
Petrobras also plans to lease another 175 vessels, including 44 crude oil carriers and 122 supply ships.
Gabrielli estimated that fewer than 20 rigs capable of drilling in very deep water are currently available worldwide, and global demand for such ships is fierce.
Meeting the company's ambitious goals could be a challenge. In a report last week, Dahlman Rose analyst Omar Nokta and colleagues said completing a recent order for 12 of the so-called deepwater rigs already under contract with foreign shipbuilders "will be a trying task and less experienced project managers may exacerbate the situation."
Gabrielli also said Petrobras plans to begin test production in the Tupi offshore oil field in the first quarter of next year using a tanker ship leased from Norwegian contractor BW Offshore. That first round of production is expected to yield 20,000 to 30,000 barrels of oil per day.
By the end of 2010, Petrobras expects to produce 100,000 barrels per day from the Tupi field under a pilot production program, Gabrielli said.
Industry observers have been eagerly awaiting details about the Tupi field, a massive discovery announced in November. Petrobras estimates the field contains 5 billion to 8 billion barrels of oil, making it the biggest find in the Western Hemisphere in more than three decades.
However, accessing the underwater oil is difficult and expensive because it lies beneath rock and salt deposits that are more than a mile deep at some points.
Gabrielli said Petrobras spent 14 months and $240 million _ nearly a quarter of a billion dollars _ drilling the first test well in the Tupi field, but has since brought the cost down to $60 million to $80 million per well, which now take two to three months to build.
Petrobras expects oil and natural gas production to rise to the equivalent of 4.2 million barrels per day by 2015, not counting any production from Tupi or other recently discovered fields nearby. Production last year totaled 2.3 million barrels per day.
Petrobras shares have risen sharply in recent months, driven by surging global oil prices and expectations of as-yet untapped reserves in the Tupi field and other deposits in the same region, known as the Santos Basin.
Analysts say Tupi and the nearby Jupiter natural gas field could turn Brazil into a major oil and gas exporter and lead it to join the Organization of Petroleum Exporting Countries.
Gabrielli sidestepped a question about OPEC membership, saying it was an issue that rests with the Brazilian government. He noted, however, that the cartel is primarily an exporter of crude oil, whereas Petrobras plans to shift a larger part of its operations to refining.
"Probably, we are going to be more in the export side of oil products, not crude oil," he said.
Petrobras shares fell $3.20, or 4.6 percent, to $65.80 in afternoon trading.


Updated : 2021-04-17 03:57 GMT+08:00