Brazil's dreams collide with reality

Brazil's Hopes for Home-Grown Offshore Rigs Hits Credit Snag

Brazil, a net oil importer until 2006, is primed to become one of the world's biggest producers over the next decade as it develops several fields in a portion of the Atlantic Ocean known as the Santos Basin thought to contain billions of barrels of crude. In addition to boosting production, Brazil hopes to follow in the path of Norway, which in the 1970s used the discovery of oil in the North Sea to create world-class drilling and technology sectors. Over the past two years, state-run energy giant Petroleo Brasileiro SA, known as Petrobras, has awarded 20 out of 30 contracts to construct drilling rigs to Brazilian-based firms with little experience in deepwater drilling.But the fledgling Brazilian deepwater rig industry is running up against the realities of the tight credit market. Several of the contract winners haven't been able to borrow money needed to finish construction on the rigs they promised, which can cost more than $600 million each. Should their struggles continue, Petrobras will be forced into a difficult choice. The rising energy giant would need to add billions of dollars to a long-term budget already in jeopardy over concerns about the future availability of credit to ensure the rigs get built on time, or risk delaying Santos Basin production for lack of equipment. With Brazil hoping to increase production by 2 million barrels of oil equivalent a day by 2015, Petrobras' options may be limited...

Good news for the established drillers. My opinion from the start was that Brazil's artificial attempt to create it's own offshore industry was doomed to fail at least partially even without the credit crunch.