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(Bloomberg) -- Brazilian regulators are cracking down on some offshore drilling by oil giants like Petrobras and Equinor ASA, complicating exploration and production projects at a key moment in the nation’s effort to boost crude output.
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The drilling delays will complicate the nation’s efforts to reverse last year’s oil-production decline. Prior to 2024, Brazil had been a booming source of non-OPEC supply growth in global oil markets. Should output continue to flatline in 2025, that may signal to the OPEC+ alliance that it can begin raising exports without risking a price-killing supply glut.
Although some drilling halts resulted from serious safety issues — a Feb. 14 pump failure triggered an explosion aboard a Valaris Ltd. drillship working for Equinor — others have been suspended for seemingly minor issues that normally wouldn’t cause disruptions, according to executives who asked not to be identified discussing sensitive information.
At least three other drillships have been halted in recent months, according to some of the people. The stoppages are slowing both exploration for untapped oil fields and the drilling of auxiliary wells in older discoveries. Two Petroleos Brasileiro SA rigs were temporarily suspended as of Feb. 20, prompting the establishment of a working group to better address regulatory concerns, the state-owned oil company wrote in response to requests for comment.
Neither Brazil’s oil regulator, known as the ANP, nor the Mines and Energy Ministry responded to requests for comment. Brazil pumped more oil than most OPEC members last year with 3.4 million barrels of daily output — enough to account for roughly 3% of global supplies.
Unplanned shutdowns and licensing delays dogged the Brazilian oil industry in 2024. The International Energy Agency, Rystad Energy AS and Wood Mackenzie Ltd. all forecast an output increase by Latin America’s biggest source of crude last year, only to be disappointed.
The increase in drilling stoppages began in December and coincided with the departure of the previous head of the ANP, according to the executives, who asked not to be named discussing non-public information. The suspensions have sent a chill through Rio de Janeiro oil circles as explorers and contractors face the prospect of a more restrictive operating environment.