Koil Energy Solutions Inc. (KLNG)

[MossyOak]

Petrobras: oil price to stay high, fleet will grow

Meeting the company's ambitious goals could be a challenge. In a report last week, Dahlman Rose analyst Omar Nokta and colleagues said completing a recent order for 12 of the so-called deepwater rigs already under contract with foreign shipbuilders "will be a trying task and less experienced project managers may exacerbate the situation."

The head of Petrobras predicted Tuesday that oil prices will likely remain high in the coming years, and said the Brazilian state-run oil giant plans to significantly expand its fleet of drilling rigs and other vessels.

Speaking at a gathering organized by the Brazilian American Chamber of Commerce, President and Chief Executive Jose Sergio Gabrielli said the price of oil is being driven by strong global demand and tight supplies, primarily in the Middle East.

That situation, he added, is unlikely to change for four to five years.

"We cannot see why the price of crude would fall," Gabrielli said.

Oil prices rocketed to a record above $139 a barrel late last week, but have eased somewhat since then. On Tuesday, light, sweet crude for July delivery fell $3.04 cents to settle at $131.31 a barrel on the New York Mercantile Exchange.

Gabrielli declined to predict how high prices could rise or even to provide a possible range, because of the market's volatility, which he said is likely to continue: "It's worthless to give a number," he said.

Gabrielli said his company, which is formally known as Petroleo Brasileiro SA (nyse: PBR - news - people ), expects to lease 57 new drilling rigs between next year and 2017, with nearly all capable of drilling in water deeper than 2,000 meters (6,562 feet).

About half of those rigs are already contracted, while another 28 must still be leased and are expected to start coming online within five years. Gabrielli said the company will require that the 28 be built in Brazil.

"We know this is going to impact the sector worldwide," he said. "We are giving the industry five years to prepare."

Petrobras also plans to lease another 175 vessels, including 44 crude oil carriers and 122 supply ships.

Gabrielli estimated that fewer than 20 rigs capable of drilling in very deep water are currently available worldwide, and global demand for such ships is fierce.




http://www.forbes.com/feeds/ap/2008/06/10/ap5101430.html


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