'Brazil is the best market for offshore drilling rigs today’

One of the main operators of offshore drilling rigs in Brazil, Constellation, is open to partnerships to operate additional units and leverage its cash flow. 

Among the possibilities under consideration are so-called floatels, which are floating offshore maintenance units, and bareboat or management agreement type contracts to operate third-party drilling units. 

In this interview, Constellation's CEO, Rodrigo Ribeiro, talks about ongoing activities and the advantages of the Brazilian market.

BNamericas: What’s the status of Constellation's fleet of rigs?

Ribeiro: Constellation has a fleet of seven offshore rigs, all under contracts that expire between 2024 and 2028. There are three double-tower drillships, one of which is a seventh-generation drillship, three semi-submersible platforms with dynamic positioning and an anchored drillship that enables us to carry out a wide range of offshore activities.

Last year, asset utilization increased by 22.4% compared with 2022 and reached an average operational uptime of 94%.

BNamericas: What are the prospects for the Brazilian offshore drilling market? Do you expect growth in the coming years?

Ribeiro: The market is promising, mainly due to the privileged geology, the high productivity of the wells, which brings a competitive cost for production, and the reduced emission of greenhouse gases in the production process.

Petrobras, as the country's largest producer, has an ambitious plan to increase its production over the next few years, with a fixed demand for the arrival of new FPSOs that will require a fleet of rigs capable of drilling the wells needed for the expected production.

Then there are the upsides of the new frontiers. We know that the government understands the importance of capturing untapped value in new frontiers, such as the Equatorial Margin. I don't believe that Brazil will give up on this wealth, nor on short-term volatility in the drilling market.

We signed six new contracts during the company's restructuring period, which demonstrates customer confidence. We’re about to transition these contracts, with better market conditions and repriced rates. 

We estimate that, as of 2026, we’ll move from an Ebitda of US$190 million projected for this year to an Ebitda in the range of US$500mn. The company's business plan is very solid.

BNamericas: Is the number of rigs contracted in the country expected to increase?

Ribeiro: Brazil is the best market for offshore drilling rigs today.

The demand for drilling activity over the next five years is already contracted and committed, mainly due to Petrobras' commitments to mobilize 14 new FPSOs by 2028, with the possibility of seven more under study. Each of these will require 12 to 15 wells to be drilled. Based on this, we’ve built our solid business plan, anchored in visible demand.

In addition, we know that the country has opportunities for upsides. The market has undergone diversification with Petrobras' divestments. Independent operators will continue to demand at least 10% of the drilling market, and Brazil has a lot to gain from a strong Petrobras allied to a healthy market with diversified players. Today, we have one of our seven units working for 3R Petroleum. 

There’s also a contract for abandonment and decommissioning, defined in commitments with [regulator] ANP. We believe that our anchored rig Atlantic Star, the only one of its kind in the country, will be extremely useful in this area.

BNamericas: Is it possible that there will be a shortage of rigs to meet demand in the country in the coming years?

Ribeiro: There are currently 34 drilling units in operation in Brazil, 26 rigs working for Petrobras and eight for other IOCs [international oil companies] and independent operators. Some 44 exploratory wells are expected to be drilled between 2024 and 2028. Therefore, I believe it’s necessary to mobilize new rigs in Brazil from abroad.

BNamericas: Are the daily rates for equipment likely to increase?

Ribeiro: I believe the rates will remain stable and solid for longer. 

BNamericas: Is Constellation considering acquiring new rigs in the future? Is ordering the construction of new equipment a possibility?

Ribeiro: We operate seven units from our hub in Rio das Ostras, in Rio de Janeiro, and we have the capacity to operate up to 12 units without significant additional investments in infrastructure. We’re on the lookout for partnerships that could enable us to leverage our cash flow even more by operating additional units. This doesn’t mean building new units. I believe that the drilling market, in general, still doesn't see this as a possibility in the short and medium term, but there’s room for new units to come to Brazil.

Other types of units can be incorporated into our portfolio through partnerships, such as floatels [floating offshore maintenance units], support units, service units, and bareboat or management agreement type partnerships to operate third-party drilling rigs, which has always existed in our segment. 

BNamericas: Does the company plan to invest in the maintenance of its rigs in the coming months or years? 

Ribeiro: Investing in rig maintenance is part of Constellation's routine and is one of the cornerstones of any successful project, alongside daily rates and time between contracts.

In February, Constellation and Seagems changed the thruster on the offshore drillship Laguna Star, under contract to Petrobras, around 200km off Rio de Janeiro.

The maneuver was considered a milestone in the Brazilian offshore oil and gas industry. Until then, azimuth thruster replacement activities in the country had only been carried out in sheltered waters.

BNamericas: Does Constellation also intend to invest in new technologies and human resources?

Ribeiro: We’re preparing to be the preferred drilling partner for operators in Brazil for research and development projects associated with the decarbonization of operations and new energy ventures.

We created a department focused on researching and developing technological alternatives for carrying out well construction services with lower fuel consumption and guaranteeing the same levels of operational safety.

In 2023, we approved our first R&D project in partnership with Petrobras and Universidade de São Paulo to structure a solution focused on reducing fuel consumption when operating rigs in offshore fields. The initiative consists of an artificial intelligence platform to support the measurement and optimization of energy management on board.

One of the technologies being evaluated is the use of hydraulic accumulators to reduce the number of electric motors needed to operate the rig's drilling system. In 2023, we carried out initial tests with this technology on the Brava Star, achieving reductions in absolute diesel consumption.

Other energy efficiency projects are under development in the areas of digital solutions, main engines, combustion, generation and auxiliary systems.