After failing for the third time to find commercially viable
amounts of crude in Brazil’s deep waters last year, the Texas oil giant has
stopped its current drilling efforts in the offshore acreage it started
snapping up with partners for $4 billion in 2017, these people said.
The company has shifted geologists and engineers who had
worked on the years long drilling campaign from its offices in Rio de Janeiro
to other countries including Guyana, Angola and Canada, they said. It hasn’t
put out tenders to drilling contractors for exploratory work there in the year
since its last active rig contract expired in April 2022, analysts said, and it
skipped Brazil’s latest offshore auction in December.
Exxon’s moves to dismantle its recent drilling campaign in
Brazil mark a major setback in a country that it has promoted for years as a
key source of growth.
In December, Exxon Chief Executive Darren Woods pointed to
Brazil as one of its major "growth opportunities" and part of its
portfolio of low-cost supply developments, alongside Guyana, the Permian Basin
of West Texas, and New Mexico, and exports of liquefied natural gas.
Exxon hasn’t ruled out future projects in Brazil, people
familiar with the matter said. Michelle Gray, a spokeswoman for Exxon, said the
company is still engaged in Brazil and continues to pursue exploration activity
in the country.
"Our initial exploration drilling program in Brazil is
now complete," Ms. Gray said. "We continue to work with our
co-venturers to analyze the data acquired from the extensive drilling program
to assess the potential for future exploration activities in those
blocks."
Irving, Texas-based Exxon re-entered Brazil six years ago,
with high hopes it could repeat the successes other drillers had in Brazil’s
offshore geological formations more than a decade ago. Brazil has become one of
a dwindling number of places around the world where large oil companies still
spend money to search for oil. Despite some companies’ recent struggles to find
oil there, Brazil is currently the hottest market for offshore drilling rigs,
led by government-owned Petrobras.
Exxon has said it plans to spend most of its annual capital
budget of up to $25 billion in the Americas this year, including in Brazil, a
focus on the Western Hemisphere that reflects the company’s priority to growing
shareholder returns and cutting costly frontier-drilling projects.
Exxon has a minority stake in a separate offshore project in
Brazil led by Equinor, called Bacalhau, that is moving forward. The companies
authorized the first phase of the project in 2021 and expect it to come online
in 2025, pumping some 220,000 barrels a day.
Last year, Exxon sold or proposed to sell assets in Chad,
Cameroon, Egypt, Iraq and Nigeria, along with some legacy assets in the U.S.
and Canada, making for its largest number of such sales since 2018, according
to FactSet. The company had planned since 2018 to sell at least $15 billion
worth of assets as it pared down its global footprint and focused on its most
valuable assets.
In 2021, Exxon drilled two wells in Brazil’s Campos and
Santos basins. Last year, it drilled a third in the Sergipe-Alagoas basin. None
of the three wells off Brazil had enough oil to be commercially viable.
The failure stands in contrast with its success in Brazil’s
neighbor, Guyana, where it has found decades worth of oil in recent years.
Exxon has six drilling rigs working in Guyana and is expected to pick up more
contracts there in coming months, analysts said.
Exxon also deployed a drill-ship to Angola last year, and
that rig is working on a two-year contract, marking Exxon’s first exploration
efforts in the West African country since 2018, according to drilling-rig
tracker RigLogix. The drill-ship began work a few months after Exxon drilled
the underperforming well in Brazil.
"There was a lot of hope for what Brazil could have
been. Exxon doesn’t do well" with multiple noncommercial wells, said
Schreiner Parker, an analyst at Rystad Energy. He said the company is asking
itself, "‘Do we want to keep throwing good money after bad?’"
Those deep-water wells off Brazil cost between an estimated
$100 million and $150 million, typically, according to energy consultant Wood
Mackenzie. Exxon and its partners in the Sergipe-Alagoas region don’t have any
exploratory wells in that region scheduled for 2023, one of the partners,
Brazilian oil company Enauta Participacoes SA, said in November.
Other Western oil companies have also struggled to make
commercial discoveries in recent years, but Exxon’s peers Shell PLC, BP PLC and
TotalEnergies SE are continuing to drill in Brazil, said Marcelo de Assis, an
analyst at Wood Mackenzie.
"Exxon, like most of the [integrated oil companies]
entering Brazil, had very positive expectations," he said. "Most of
the companies have had bad results in exploration."
Exxon hasn’t had active drilling rigs working in Brazil
since last year and hasn’t put out any tenders for exploratory work, according
to RigLogix. The earliest it might be able to add a rig in Brazil in its
current acreage is in mid-2024, said Terry Childs, head of RigLogix, which is
part of the Westwood Global Energy Group.
Still, Exxon would consider drilling in the equatorial
margin off northern Brazil, far from its current leases further south, people
familiar with the matter said. Petrobras is currently waiting to receive
permission to drill in the region—deemed an environmentally sensitive area—from
Brazil’s environmental regulator, which has held up drilling permits in the
area for years, analysts said.
For now, Exxon is expected to continue focusing primarily on
Guyana and the Permian.
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