The South American deepwater and ultra-deepwater exploration and production (E&P) market is expected to register 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 expected to witness an annual growth rate of 1.2 million barrels per day (mbd) till 2023, are likely to drive the market during the forecast period. However, volatile crude oil prices, instability in the oil and gas industry, and higher challenges in developing deepwater prospects are likely to affect the growth of the market.

  • The deepwater oil and gas projects are the largest segment, and they are expected to witness a significant growth rate over the forecast period, owing to the upcoming deepwater exploration and production projects in 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 market studied.



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, particularly from the offshore areas, with improving projects viability.
  • Moreover, Petrobras, a major company in the region, has planned for a USD 74.5 billion investment in Brazil during 2018-2022, around 81% of which has been allotted toward the exploration and 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. Around 13 companies offered approximately USD 995 million for exploration licenses of areas within the Argentine 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.
  • Owing to huge investment and the government policy, the market is expected to grow during the forecast period.



Brazil is Likely 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 end the disinvestment scenario. A series of bids were 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 and 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 the market studied.
  • 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 and 2025 in Brazil, which include offshore and onshore prospects.
  • During 2019, Brazil dominated the top 10 greenfield developments sanctioned 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 is expected to propel the market studied, during the forecast period.



Competitive Landscape

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

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