(Bloomberg) – Brazil’s national oil company will likely delay awarding as many as four drilling contracts for its largest offshore field by at least a few months, according to people familiar with the matter — a move that comes as traders eye the country’s production closely amid an emerging global crude glut.
Petrobras, which was expected finalize drillship contracts for the Buzios field this year, is waiting until 2026 in part because it’s gaining knowledge of the reservoir that will help it locate upcoming wells more effectively, said two of the people, who asked not to be named discussing information that isn’t public. Another person said Petrobras has given contractors until the end of 2025 to revise their offers.
The drilling program will determine how fast Petroleo Brasileiro SA, as it’s formally known, reaches peak production at Buzios, a key source of Brazil’s output growth this year that has contributed to a global oil surplus. Buzios recently surpassed 1 MMbpd and could reach double that amount around the end of the decade.
Demand for ships that can drill for crude in deepwater areas is easing as higher costs, faltering oil prices and competition from cheaper onshore output prompt drillers to target only the most prolific areas. Crude supply worldwide will exceed demand by just over four million barrels a day next year, the International Energy Agency said in a report earlier this month.
Petrobras currently has an ongoing process to contract drilling rigs for Buzios, it said in a response to questions, without detailing when the contracts will be awarded. The company continually reviews demand for critical resources, including drilling units, to optimize project development, it said.
See also: Petrobras boosts Buzios deepwater oil output to 1 MMbpd, adding to global supply glut
The contracts are a key source of future revenue for drillship operators and the wider oil services industry that supplies the subsea equipment to complete the wells. Petrobras has been pressuring suppliers to cut costs to help compensate for lower oil prices, analysts and offshore contractors have said.
Offshore rig contractor Valaris Ltd. sees Brazil contributing almost a third of drillship demand through 2029, according to a quarterly earnings presentation. The industry is in a temporary quiet spell with rig activity expected to bottom out later this year and then improve in 2026, which should lift the cost of leasing units, Chief Executive Officer Anton Dibowitz said last month on a call with analysts and investors.
