--Demand for energy to drive growth in offshore rig market,
rental rates through 2020
--Drilling in Gulf of Mexico expected to surpass pre-Macondo
disaster levels
--Ensco executive downplays Brazil government oversight, recent
oil-spill court cases
By Jeff Fick
RIO DE JANEIRO--Global energy needs will continue to drive
demand for the specialized drilling rigs needed to tap ever-deeper
offshore oil fields through the end of the decade, fueling
increases in daily rental rates as countries such as Brazil exploit
recent discoveries, an executive with Ensco Plc (ESV) said
Friday.
U.K.-based Ensco, the world's second-largest drilling company,
expects growth to be led by deep-water drilling rigs and jackups, a
type of shallow-water drilling platform common in the Gulf of
Mexico that can be raised or lowered on legs attached to the sea
floor, said Kevin Robert, Ensco's senior vice president for
marketing, in an interview. Higher rates generated by such demand
should justify construction of expensive new rigs, he added.
Oil exploration is booming as companies take advantage of high
international crude prices and growing demand from emerging markets
such as Brazil, China and India. Important oil-producing regions
such as the Gulf of Mexico and North Sea have been joined by new
frontiers in Asia-Pacific, Brazil and West Africa to push
exploration efforts to levels not seen since 2005, Mr. Robert
said.
"The Gulf of Mexico has really bounced back," he said, adding
that the number of rigs working in the Gulf should exceed the
number drilling before the Macondo disaster of 2010. Industrial
growth in China, meanwhile, has caused never-before-seen demand for
rigs targeting previously ignored natural-gas fields in the
Asia-Pacific region, he added.
Exploration work, which can be volatile depending on commodity
prices, typically leads to longer-term contracts as new discoveries
are developed.
"Good exploration spending bodes well for development drilling
five or six years from now," Mr. Robert said. Development drilling
typically yields the five- to 10-year contracts that are the
industry's bread and butter.
That is especially evident in Brazil, home to some of the
world's largest discoveries over the past 20 years. State-run
energy giant Petrobras (PBR, PETR4.BR) plans to spend $237 billion
through 2016 to develop an ultra-deep-water province known as the
presalt. The fields are expected to push Petrobras's crude oil
output to 4.2 million barrels a day, more than double current
production, by 2020.
Brazil represents more than half of the world's demand for
deep-water drill ships and semi-submersible rigs, with 11 of
Ensco's fleet of 70 rigs drilling there, Mr. Robert said. Ensco
considered participating in a tender to build rigs in Brazil, but
opted not to bid because it already had a construction program
under way in Singapore, he said.
Ensco already adheres to stringent rules on locally produced
goods and services, with about 70% of the crews operating offshore
composed of Brazilians, according to the executive.
Mr. Robert downplayed concerns about growing government
oversight of the oil and gas industry in Brazil, where the
government recently implemented a new legal framework that will
include production-sharing agreements for subsalt fields currently
under its control.
"There's no reason to be in a panic about Brazil," Mr. Robert
said. "[Brazil] is a very stable country with a practical and
reasonable government that understands what they're doing."
President Dilma Rousseff's 2010 election and a change in
leadership at Petrobras, where Maria das Gracas Foster took over in
February, likely resulted in a two-year delay to new bid rounds in
Brazil, Mr. Robert said. Earlier this week, the government said it
would hold a new concession auction in May and the first subsalt
auction in November.
Recent changes show Brazil is being careful about how it wants
to develop an important natural resource, and that is likely good
for business, he said. "It bolsters confidence in the ability of
the government to manage this and give long-term business to
service contractors."
Uncertainty is what causes companies to opt out of investments,
but Brazil "is trying to make sure it's clear how to get involved
there," Mr. Robert said.
Recent court cases against U.S. oil major Chevron Corp (CVX) and
rig operator Transocean Ltd. (RIG), which face operating bans and
lawsuits related to an offshore oil spill last year, also aren't a
concern, Mr. Robert said.
"It doesn't affect our outlook on Brazil, just like Macondo has
not affected our outlook on the Gulf of Mexico," he said. "We've
had oil spills in the North Sea. Brazil is not the only place where
these types of things happen."
Write to Jeff Fick at Jeff.Fick@dowjones.com
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