Brazil is known for its unique business environment and how cyclical economic activity can be in various sectors.
Between 2012 and 2016, Brazil experienced a major boost in investment, driven mainly by government policies. The oil & gas sector and its peripheral industries greatly benefited from investments with projections indicating that the country would finally reach its full potential as global player in the energy sector. However, in the latter part of 2010 the country was mired by a multitude of corruption scandals that crippled the economy and took Brazil to its biggest recorded recession.
These scandals resulted on a President being impeached and a former President being tried, convicted, and jailed for 19 months.
As the dust settled, the energy sector reorganized itself and began its rebound process and, despite the push for green energy globally, fossil fuel exploration and production remain a large element of the sector, now more than ever given the global energy crisis.
New Environment
With a complicated global environment &; where oil price has increased dramatically since the war in Ukraine - and the restructure of Brazil’s main players as well as new discoveries in the region, new light has been shone on the region and an economic recovery is now a reality, as projects in the pipe line for the sector are mounting up to $103 Billion, which is equal to 2019 projections, increasing demand for rigs and the associated upward pressure on day rates are expected to continue through to 2030 as the number of assets in the region are increasing to pre 2014 numbers. According to some sources, rig utilization is expected to reach 80% in the region within the next 16 months and average day rates exceeding $400,000.
Another key factor is the high demand for Floating Production Storage Offloading units (FPSOs) as it is forecast that 59 newbuild FPSOs are to be contracted by 2030 at a combined investment of U$$ 72.2 Billion. Brazil is the single biggest market for these new contracts, with 40% of the global projected investment (US$ 28.8 Billion) earmarked for Brazil.
As always Petrobras – Brazil’s State-Owned Operator – is leading the way on these new investments via securing new contracts with JV’s or, as their operations get pushed further offshore and deeper, the profile of wells being explored are changing to a far more complex environment, thus generating the need for the operator to acquire bespoke programs that were not part of their operating procedure.
Profile of Claims
With the surge in demand and the need to recommission rig fleets that have been cold stacked for a considerable amount of time, we could see a trend on losses associated with commissioning of these assets back to earning status. We are also seeing a change in expertise within the industry as profile of people are changing and some of the expertise gathered during the past decades can get lost in this generational transition.
Conclusion
Based on market trends and forecast for the region, the next years will be challenging for the industry hence the need for local expertise associated with global reach in claims services. That’s where CTA, In addition to our dedicated teams in the US on which we continue to build and develop, our Natural Resources Team in London and other key global hubs continue to provide specialist adjusting services for claims across the natural resources industries.
Manuel Tarantino
Managing Director & Head of Offshore Energy, Charles Taylor Adjusting
manuel.tarantino@charlestaylor.com
