Offshore Investment Returning to Brazil. Mexico and Guinea

Investment in offshore projects appears to be returning to Brazil. Guinea and Mexico following a sharp drop due to decline in oil prices from mid-2014. although other countries have yet to see a recovery.
According to a BNamerica Intelligence Series report. the decline in investment was because of higher exploration costs in offshore projects compared with other oil and gas industry segments. which led to many offshore projects being postponed. However. recovering prices. coupled with new discoveries. are brightening the offshore outlook.
The drop in offshore investment in Latin America was first seen in Brazil`s pre-salt areas. but recovery is now evident due to higher crude prices. which rose to around US$55 b in September compared with the US$27 b seen in January 2016. and lower exploration costs.
In fact. deepwater oil and gas project costs have fallen by more than 20% since 2014. according to Wood Mackenzie. and oil prices of US$50 b or even lower could sustain deepwater projects with reserves of about 5Bb. while the breakeven price in 2014 was US$75 b. according to the report.
That trend is set to continue as there is considerable scope to further reduce the breakeven price in deep water through leaner development methods and better well design. says the research firm.
Latin America`s offshore drilling fleet stood at 35 vessels in May. up from 32 the previous month and 30 in May 2016. according to services and technology provider Baker Hughes. Activity in both deep and shallow water is increasing in Brazil. Mexico and Guyana. and there are changes that point to greater medium-term momentum in Colombia. Peru. Uruguay and Argentina. according to the report.
Latin America`s active drilling rig count stood at 190 in May. further proof of the upward trend in E&amp.P investment.
In Brazil. oil production in pre-salt areas surpassed that of all other fields for the first time in June. accounting for 1.35Mb d of a total of 2.67Mb d. and that trend is expected to continue rising amid higher levels of exploration. due to the growing productivity of pre-salt compared with post-salt areas. in addition to the higher productivity of pre-salt wells and the reduction in development costs.
Activity in both deep and shallow waters is also picking up in Mexico and Guyana and there are changes that point to greater momentum in the medium term in Colombia. Peru. Uruguay and Argentina. the report states.
Mexico will hold a shallow water farm-out on October 4. the latest in a series of moves by state oil firm Pemex to ramp up production and share risk and investment with more experienced partners. particularly in deep water. It also plans a deepwater farm-out for January.
In Guinea. ExxonMobil and Hess. partnering with CNOOC Nexen Petroleum Guyana in the offshore Stabroek block. in June announced an investment of US$4.4bn for the first stage of development of the Liza field. with first oil expected production in 2020. And in July. ExxonMobil reported the discovery of high-quality oil sands after drilling the Payara-2 well. also in Stabroek.
However. in other Latin American countries with offshore potential. activity has still not recovered lost momentum. the report states.

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