South America Deep Water and Ultra Deep Water Exploration & Production (E&P) Market - Growth, Trends, and Forecasts (2020-2025)

The South America deep water and ultra deepwater exploration & production (E&P) market is expected to grow at a CAGR of more than 4.5% over the period of 2020-2025. Factors such as improved viability of deepwater and ultra-deepwater projects and global demand for oil is expected to witness an annual growth rate of 1.2 million barrels per day (mbd) till 2023, are likely to drive the South America deep water and ultra deepwater exploration & production (E&P) market during the forecast period. However, volatile crude oil prices, instability in the oil & gas industry, and higher challenges in developing deepwater prospects, are likely to affect the growth of the South America deep water and ultra deepwater exploration & production (E&P) market.

• The deepwater oil and gas projects are largest segment and expected to witness a significant growth rate over the forecast period owing to the upcoming deepwater exploration and production projects in countries such as Brazil, Argentina, etc.
• Factors, such as technological improvements and increasing viability of deepwater and ultra-deepwater projects are actively promoting the development of deepwater and ultra-deepwater reserves. This, in turn, is expected to create significant opportunities for the operating countries of the region in the near future.
• Brazil is expected to be the largest market for the South America deep water and ultra deep water exploration & production (E&P) market.

Key Market Trends

Deepwater Segment to Dominate the Market

• The oil and gas industry faced a challenging business environment in 2014 due to the declining crude prices, which continued in the subsequent years. However, the September 2017 - September 2018 period turned out to be a better year for the oil and gas industry than expected, as it witnessed a significant increase in oil prices, with increased exploration and development activities across South America regions, particularly from the offshore areas, with improving projects viability.
• Moreover, Various major companies in the region such as Petrobras has planned for a USD 74.5 billion investment in brazil during 2018-2022, around 81% of which has been allotted toward exploration and the production area.
• Furthermore, a new exploration permit was awarded in April 2019 to the consortium formed by ExxonMobil and Qatar Petroleum, for exploration in Malvinas Oeste Basin. 13 companies offered approximately USD 995 million for exploration licenses of areas within the Argentina Norte, and Malvinas Oeste basins. All the three basins are offshore, combining to a total tendered area of more than 200,000 sq. km. never explored before.
• In addition, the Bolivian government proposed two laws in April 2018, which approved service contracts for natural gas exploration and production in the San Telmo Norte and Astillero areas, for an estimated USD 700 million.
• This in Turn, owing to huge investment and government policy, South America deep water and ultra deep water exploration & production (E&P) market is expected to propel during the forecast period.

Brazil to be the Fastest Growing Market

• A large portion of the nation’s oil production comes from the offshore region, with deepwater and ultra-deepwater accounting for more than 90% of the offshore production, in 2018.
• In 2018, the average offshore active rig count in the country was eight, representing a decline of about 33%, compared to the offshore rig count in 2017. Hence, the Brazilian government has made several reforms to attract foreign companies and to end the disinvestment scenario. A series of bids had been held by the government in the past to increase exploration activity in the country.
• Moreover, the Brazilian offshore oil and gas industry is expected to witness huge amount of investments between 2016-2025. The two offshore projects in Brazil, namely Libra and Itapu, are expected to get USD 15.8 billion worth of investments, with USD 2.2 billion just in signing bonuses in the 16th Bidding Round held in October 2019, providing a way to drive South America deep water and ultra deep water exploration & production (E&P) market.
• Furthermore, Petrobas is the leading firm in Brazil in terms of planned production and capital expenditure in the oil and gas sector. The company has planned to make investments worth USD 90.9 billion between 2016-2025 in Brazil, which include offshore prospects as well as onshore ones.
• Also, Brazil is dominating the top 10 greenfield developments sanctioned during 2019 in South America. In other words, the country is expected to be the dominant driver behind the growth of the offshore oil and gas industry, which in turn expected to propel South America deep water and ultra deep water exploration & production (E&P) market during the forecast period.

Competitive Landscape

The South America deep water and ultra deep water exploration & production (E&P) market is moderately fragmented. Some of key players in this market include Petroleo Brasileiro SA Petrobras, Halliburton Company, Transocean LTD, Equinor ASA, Shell Offshore Inc. and others.

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