BRAZIL: September 19, 2008


RIO DE JANEIRO - The discovery of huge offshore oil reserves has made Brazil one of the world's hottest energy markets, with firms that make everything from planning software for wells to floating "hotels" for platform workers clamoring for a piece of the action.


More than 35,000 people are attending this week's Rio Oil and Gas conference, the first since state firm Petrobras shocked the oil world last November by announcing the world's second-biggest oil find in 20 years.

As financial markets crashed around the world, executives here were busily making deals and bubbling with enthusiasm at the prospect of working with Petrobras to exploit the oil trapped below a thick salt layer underneath the ocean floor -- something that could cost up to US$600 billion.

"Being with Petrobras is a bit like being in the first gold rush in the US," said Mark Grills, a software engineer for British firm QuickWells, whose product helps engineers plan the complex internal make-up of wells.

"It's like you're discovering oil all over again."

Analysts estimate the subsalt reserves could contain up to 80 billion barrels of oil, catapulting Brazil into the top 10 oil producers.

Despite uncertainty over government plans to take greater control over the finds, falling oil prices, and global equipment shortages, executives said it was clear that Petrobras was committed to spending big in the coming years to achieve a goal of more than 1 million barrels per day of subsalt output by 2017.

Petrobras has leased about 80 percent of the world's deepest-drilling offshore rigs and plans to hire 14,000 engineers and other specialists in the next three years as it prepares for a new era that could transform Brazil's economy.

Alisdair Harrison said his UK ship services firm, Trident Marine Services, had been operating in Brazil for just three weeks but had already teamed up with a local marine electronics company. It is also in talks to help build three rigs, nine ships, and a floating hotel for workers.

"The speed is astounding," he said. "They (Petrobras) are overestimating -- they will not achieve their targets, there's a world shortage of equipment. But a line has been drawn in the sand and they are making commitments now."


TECHNOLOGY PUSH

Harrison's firm is an example of how the subsalt investments are expected to spread across the industry, beyond the platform rigs and drilling equipment needed to tap the oil up to 7 km (4.3 miles) below the surface.

Grills' is another -- he hopes Petrobras will buy QuickWells' software partly as a training tool for engineers, whose dwindling numbers are a concern for the industry.

The technological challenge of working at massive depths is pushing innovation at firms seeking a role in the subsalt bonanza. Houston-based FMC Technologies is having to boost the water-pressure resistance and anti-corrosion properties of its deep-sea equipment that provides the link between the seabed and the platforms.

It sees the demand resulting from subsalt to double its production of "Christmas trees" -- well-heads that sit on the ocean floor -- to up to 150 a year from 70-80 now.

"You really have to get your supply chain well-prepared to cope with this demand. We need more companies supporting the oil industry," said Jose Mouro, sales director of FMC in Brazil.

Italian firm Prysmian is developing cables for use at 3,000 meters (9,800 feet) of water depth, up from the current 2,000 meter limit. The firm announced a US$135 million contract from Petrobras this week as well as plans to invest US$110 million in a new factory in Brazil.

"If half of what we heard happens we will need one more plant, we will have to improve our capacity," said Darcio Rossi Jr, the manager of Prysmian's oil business unit in Brazil. (Editing by Matthew Lewis)


Story by Stuart Grudgings


REUTERS NEWS SERVICE