Brazil's well services market poised for significant growth

The latest exploraton bid in Brazil continues to assert the country's bold plan of becoming one of the top five crude oil producers in the world by 2030 and sustain that position for years to come. South America's total hydrocarbon output is expected to reach nearly 14 million barrels of oil equivalent (boepd) by 2030, which would mark a 32% increase from the more than 10.5 million boepd produced last year.

Brazil, which is already the largest oil and gas producer in the region, is expected to be the biggest contributor to this forecast growth. In Rystad Energy’s current base case scenario, based on the market consensus and respective price levels out to the end of the decade, overall hydrocarbon production in Brazil is expected to reach more than 7 million boepd by 2030, almost 56% more than last year and nearly triple the 2010 level. Brazil is currently seventh among the top global crude producers and will join the top five by 2030, per our current hydrocarbon production projection.

To support this expected growth in production, Brazil will see a wave of drilling activity. In the short-term, drilling will mainly be focused offshore, which will lead the surge in output through the end of the decade. With operators getting back on track with developments that had been impacted since early 2020 by the Covid-19 pandemic, new operators taking over assets divested by Brazilian state-run giant Petrobras in 2022, we anticipate seeing a rise in onshore drilling activity this year, compared to 2023. However, we anticipate onshore drilling activity will decline towards the end of the decade in our current base case scenario. We expect an increase in onshore drilling activity in the coming years, led by independent oil and gas operators that are developing assets divested by Petrobras.

Brazil is the global leader in terms of deepwater (125 to 1,500 meters) and ultra-deepwater (1,500+ meters) hydrocarbon production, ahead of Norway and the US. We anticipate Brazil to maintain its high levels of offshore activity throughout the remainder of the decade, with close to 600 wells to be drilled from 2024 to 2030.

What will spending look like?

We expect Brazil to spend an average of $5.4 billion annually on drilling and completion expenditures between 2024 and 2030 to meet demand. This would result in total spending on these service of nearly $38 billion between now and the 2030, driven by the complexity and expensive nature of ultra-deepwater drilling. The offshore market will account for 89% of the total spending over the period (see Figure 3 below). Rigs and drilling contractors will take up the lion’s share, accounting for 43% of the total offshore spending. This is evident from the rig demand we expect to see in the country, with floater rig demand expected to be around 30 rig years annually until the end of this decade.

Brazil shows significant investment potential, evident by the recent exploration bid round which saw the award of 48 offshore blocks and 140 onshore tracts in the fourth cycle of the country’s permanent offer regime. This was a significant jump from the last cycle of permanent offer rounds held in 2022, which saw only eight offshore blocks and 50 onshore tracts awarded. The most recent bid round saw at total of 561 offshore blocks offered by the Brazilian regulator ANP (National Petroleum Agency). The round saw seven companies pay a combined $81.2 million in signature bonuses to acquire stakes in 48 of the blocks offered, mostly in the Pelotas Basin. Seven companies included national oil company Petrobras, Norway’s Equinor, UK-based energy giants Shell and BP, US supermajor Chevron, China-based CNOOC, and Australia-listed Karoon Energy. In total, the round garnered $85 million in signature bonuses, which is quite significant for this type of bid round.

With Brazil adding more blocks, both onshore and offshore, up for grabs for potential investors, the well services market in Brazil is poised to grow in the coming years. This presents plenty of opportunities for drilling and well service providers, backed by the country’s ambitious plans to be one of the top five crude producers by the end of the decade. The country’s vast oil and gas reserves could then see it maintain a lofty position for many years to come.


Abhinav Parashar

Senior Analyst, Supply Chain Research

(The data and forecasts contained in this column are Rystad Energy’s and the opinions are of the authors.)