May 21 (Bloomberg) -- Petroleo Brasileiro SA, owner of the Western Hemisphere's largest oil discovery in three decades, plans to order 40 drilling ships and platforms worth about $30 billion for delivery by 2017.
The deep-water drilling ships and semi-submersible rigs will explore for oil and gas in seas up to 3 kilometers (1.9 miles) deep, Petrobras, as the Rio de Janeiro-based company is known, said in a statement yesterday. The vessels cost about $750 million each, said J. Michael Drickamer, an oilfield- service company analyst at Morgan Keegan & Co. in Memphis, Tennessee.
Petrobras, Brazil's state-controlled oil producer, plans to spend $112 billion through 2012 to help increase its oil and natural-gas production and expand its refining and distribution operations. The discovery of the 5-billion-to-8-billion-barrel Tupi field and the possibility of other large fields nearby may require even more spending on offshore equipment, according to Chief Financial Officer Almir Barbassa.
Building all the ships Brazil wants to build will likely be a challenge,'' Judson Bailey, a shipping and oil analyst with the Houston office of Jefferies & Co., an investment bank, said in an interview.There is a shortage of almost everything in the offshore industry.''
Foreign companies already in Brazil building ships include Singapore's Keppel Corp. and Sembcorp Marine Ltd., Galliano, Louisiana-based Edison Chouest Offshore, and Oslo-based Aker Yards ASA. Brazilian companies include construction companies Construtora Camargo Correa SA, Construtora Queiroz Galvao SA, Grupo Wilson, Sons, and Construtora Norberto Odebrecht SA.
South Korea, Singapore
Yards in South Korea and Singapore, the world's two biggest offshore vessel-building nations, are also adding new docks and extending the lengths of existing ones to work through order backlogs that stretch to 2012.
Crude oil has doubled in the past year and reached a record $133.82 a barrel in New York today. Concerns that oil supplies are lagging behind demand have boosted prices and investors have also bought the commodity as a hedge against the weakening dollar.
Petrobras in November announced the discovery of Tupi, in which Portugal's Galp Energia SGPS SA and the U.K's BG Group Plc have interests.
Daewoo Shipbuilding & Marine Engineering Co., the world's third-largest shipyard, submitted a bid to Petrobras to supply drill vessels and semi-submersibles on April 10, Lee Jae Ha, vice president of Daewoo Shipbuilding's offshore marketing, said today from Seoul.
Daewoo Interest
We expect very good results from the bidding,'' Lee said.Once they start drilling oil, there will be demand for offshore production facilities, which Daewoo Shipbuilding is also interested in.'' He declined to say when the contracts will be announced.
Shares of Daewoo Shipbuilding gained 4.7 percent to 47,850 won in Seoul, the highest in four months. Samsung Heavy Industries Co., the world's second-biggest shipbuilder, closed unchanged after rising as much as 2.5 percent.
Sembcorp Marine's stock gained 2.6 percent to S$4.41 in Singapore, the highest since December. Keppel rose 1.9 percent.
We expect Petrobras will have more work in deep water,'' Choo Chiau Beng, a senior executive officer at Singapore-based Keppel, the world's largest builder of oil rigs, said on April 24.There will be demand for offshore equipment, both drilling and offshore production, and as the biggest yard in Brazil, we will definitely benefit.''
Sarah Seah, a Keppel spokeswoman, declined to comment today.
Brazil's Plan
The plan was announced a day after Petrobras and shipping and construction industry officials met with Dilma Rousseff, chief of staff to Brazilian President Luiz Inacio Lula da Silva to map out how the country can increase its ability to build equipment needed by the oil industry in Brazil.
While preference will be given to Brazilian-built equipment, foreign contractors and yards will also be allowed to bid on the ships, the Petrobras statement said. The Brazilian government has low-cost loans available for Brazilian ship construction.
Last week, Petrobras Chief Executive Officer Jose Sergio Gabrielli said the company also planned to order 146 offshore oil service ships over the next six years to manage, supply and service offshore rigs and platforms.
You already have companies from the U.S. and other countries setting up in Brazil to take advantage of the shipbuilding growth expected,'' said Tim Coulton, a former shipyard manager, a shipbuilding consultant and owner of ShipbulidingHistory.com in Delray Beach, Florida.The big risk in this industry though, is to build huge capacity only to see demand disappear.''
Transpetro
Brazil, the world's second-largest shipbuilder after Japan in 1980, according to Lloyd's Register, built no ships over 100 tons in 1999. Rising Petrobras oil production has caused the industry to revive. An industry that built nothing nine years ago and employed only about 2,000 workers, now has more than 80 firm orders for ships and 40,000 workers, according to Sinaval, Brazil's shipbuilders association.
Those orders include more than 20 tankers from Transpetro, Petrobras' transportation unit. Transpetro may announce another order for at least 16 more tankers by the end of May, Sergio Machado, President of Transpetro said in an interview last week.
Petrobras preferred shares, the company's most-traded class of stock, rose 85 reais, or 1.7 percent, to 52.51 reais in Sao Paulo trading. This week the company surpassed Microsoft Corp., Industrial and Commercial Bank of China Ltd. and General Electric Co. to briefly become the world's fifth-largest company by market value.