Royal Dutch Shell’s announcement yesterday that it is acquiring the BG Group for $70 billion was mainly about LNG. As Ben van Beurden, Shell’s chief executive, said Wednesday when announcing the deal, LNG “is a very very important component of this.”

But the deal will also make Shell a big player in Brazil’s valuable deepwater oil fields. It refocuses the spotlight on Brazil, where the deepwater situation has suffered serious deterioration.

 On the same day that Shell announced the acquisition, Brazil offshore drilling company Schahin Group confirmed that it was suspending operations of five deepwater drillships operated for Petrobras offshore Brazil. The suspension comes in the middle of a growing corruption scandal embroiling senior Brazilian government officials and Petrobras, the world’s most indebted energy company, involving many millions of dollars in bribes and kickbacks. Petrobras, and those senior government officials, are specifically accused of receiving bribes from a cartel of offshore companies, including Schahin. The drilling company is now banned from bidding on future Petrobras contracts. While Schahin says it is evaluating the situation, the company is heavily leveraged and, according to reports, in trouble with creditors and close to filing bankruptcy.

But Schachin’s troubles are just the tip of the iceberg in the wider Brazilian scandal.

Given the situation offshore Brazil — a crisis from which recovery will be long term and require the restructuring and reorientation (not to mention a thorough cleansing) of the offshore program — the wisdom of Shell’s investment may seem questionable, even though they will acquire some 600,000 bpd equivalent of production in the area immediately through shared ownership with Petrobras in the Santos Basin and parts of the Barreirinhas Basin. The upside potential is good. Over the next three years, nine FPSOs are scheduled for installation on those fields in which BG has an interest.

Shell’s acquisition of BG Group aside, we can only hope for the best in the Brazilian offshore market, especially with vessel day rates and utilization, which seem likely to take a hit in the wake of the crisis as drilling and investment slow. With Petrobras as the dominant force in Brazil’s deepwater, and a government whose integrity is still suspect, vessel owners should give Brazil a wide berth for now.