Subsea 7 lands Brazilian job

Brazilian giant Petrobras has awarded offshore engineering company Subsea 7 a five-year contract to supply a dedicated deep-water flexible pipelay vessel for operations off Brazil.
Josh Lewis 14 November 2011 09:12 GMT
Subsea 7 said it would build a new flexible pipelay vessel to carry out the contract which is scheduled to start during the second half of 2014 and worth an estimated $500 million.

The new vessel will be equipped for transporting and installing flexible flowlines and umbilicals in water depths of up to 3000 meters and will have a tiltable lay system with a top-tension capability of 550 tonnes, two under-deck storage carousels, a large deck crane and two work-class remotely operated vehicles.

Subsea 7 estimated the total cost of the vessel at $350 million and is expecting delivery during the second half of 2014.

Brazil workers to decide Petrobras strike Tuesday

RIO DE JANEIRO -(MarketWatch)- The union representing oil workers at Brazil's state-run energy company Petroleo Brasileiro SA (PBR, PETR4.BR), or Petrobras, said that it will meet the company's CEO for last-ditch negotiations later Monday before deciding on a date for a strike that aims to undercut crude oil output.

The Brazilian Oil Workers Federation, or FUP, said it will meet with CEO Jose Sergio Gabrielli at 2000 GMT, a spokeswoman for the union said in a telephone interview. FUP is an umbrella union that negotiates on behalf of 12 affiliated unions across Brazil, representing nearly 60,000 of Petrobras's 75,000 employees.

"We sought this meeting directly with [Gabrielli] to see whether there was some way to advance the negotiations," the spokeswoman said. Petrobras declined to confirm the meeting. Should the meeting with Gabrielli not prove fruitful, FUP and its affiliated unions will meet Tuesday in Rio de Janeiro to decide on a strike date, the spokeswoman said.

The oil workers join a plethora of employee groups calling on Brazilian companies and the government to increase wages and benefits, asking to share in the country's robust economic growth and to offset higher local prices. Bank workers walked off the job for more than two weeks last month in one action, causing delays and long lines at the country's financial institutions.

Two previous proposals made by Petrobras were rejected by workers, including the latest offer made Nov. 14, the spokeswoman said. The oil workers were told that the Nov. 14 offer would be company's last, prompting the search for a dialogue with Petrobras's Gabrielli, the spokeswoman added. Oil workers are seeking a 10% salary increase on top of inflation, as well as other benefit increases, higher safety standards and an end to outsourcing.

Oil workers had previously planned to strike at any time starting from Nov. 16, but delayed a decision until Tuesday after Petrobras made the last proposal.

"If there is some kind of response from Petrobras [on Monday], it could be put up for debate at the Tuesday meeting," the spokeswoman said.

The last major strike at Petrobras took place in July 2008, when oil workers walked off the job for five days to protest work issues and profit-sharing proposals. The strike cost Petrobras about 63,000 barrels of daily crude oil production

Sinopec to acquire stake in Galp's Brazilian acreage

China’s Sinopec Group, aiming to increase its presence in Brazil, agreed to acquire a 30% stake in the Brazilian unit of Galp Energia SGPS SA for $5.18 billion.
Closing remains subject to approval by the Chinese government. Terms of the agreement call for Sinopec to acquire Galp board seats.
Galp subsidiaries Petrogal Brasil and Galp Brazil Services will issue new shares equivalent to 30% of the enlarged shareholder base, which Sinopec will purchase for $4.8 billion. The state firm will pay an additional $390 million to cover debt.
Galp’s primary assets in Brazil include four deepwater blocks: BM-S-11, BM-S-24, BM-S-8 and BM-S-21 in the Santos basin, Sinopec said.
Analyst Juliet Kerr of IHS Global Insight said the partnership with Sinopec will help Galp Energia finance its share of development costs related to the Tupi, Cernambi, and Iara presalt projects in Brazil in which it participates.
But Kerr noted that the agreement will mark a “significant” boost to Sinopec’s standing in Brazil’s oil and gas industry, especially following its earlier purchase of stakes in the sector from Repsol YPF SA.
The agreement marks the latest in a series of purchases by Chinese companies in Brazil’s offshore oil fields.
Sinopec paid $7.1 billion for a stake in Repsol’s Brazilian assets. Sinochem’s acquired a $3.1 billion stake in Peregrino oil field from Statoil.

Repsol finds more oil off Brazilian coast

MADRID — Repsol, Spain's biggest oil group, said Monday it has made a new oil discovery off the coast of Brazil together with Chinese partner Sinopec, Britain's BG Group and Brazil's Petrobras.
The field containing "high quality" crude was discovered nearly 300 kilometres (185 miles) off the coast of Sao Paulo at a depth of 4,830 metres, it said in a statement.
Repsol and its partner Sinopec have a 25 percent stake in the consortium which is led by Petrobras which has 45 percent. The remaining 30 percent is held by BG Group.
In June, the company announced it had discovered two grades of "good quality" oil about 190 kilometres off the coast of Rio de Janeiro.
Last week, Repsol announced its largest-ever oil discovery, saying it had discovered nearly a billion barrels in unconventional oil and gas in Patagonia, a find that doubles its proven reserves in Argentina.
Repsol has a significant portfolio of projects in Brazil, including a producing field, a block under development, two planned pilot projects and 14 exploration blocks of great potential.

Brazil fines Chevron $28 million for oil spill

Sao Paulo, Brazil (CNN) -- Chevron was fined $28 million for an oil spill off the country's coast and could face further penalties, state media reported on Monday.
The leak off Rio de Janeiro state has stopped, said Curt Trennepohl, president of the Brazilian Institute of Environment and Renewable Natural Resources, according to state-run Agencia Brasil. Residual oil in the rocks, however, may still rise to the surface for a few days, he said.
Trennepohl said Chevron was hit with a $28 million fine and could face more penalties if it is shown the company failed in the execution of its emergency plan, Agencia Brasil reported.
Rio de Janeiro Environment Secretary Carlos Minc criticized drilling contractor Transocean, accusing the company of trying to drill at too high a pressure, given the geological characteristics of the seabed.

(Photo: Greenpeace activists protest an oil spill off the coast of Rio de Janeiro, Brazil, on Friday, November 18)

"This accident was avoidable. ... It was incompetence. That is an environmental crime, " he told Brazil's Globo TV.
A Transocean spokesman said the company is cooperating with authorities but declined to provide further information.
"Transocean continues to fully cooperate with Chevron, the operator of the well, and the Brazilian authorities in all aspects of this matter," spokesman Guy Cantwell said.
Transocean owned and operated the Deepwater Horizon drill rig, which exploded last year, kicking off the worst oil spill in U.S. history. The company remains tangled in legal disputes with BP and Halliburton over responsibility for the 2010 gusher. A U.S. government report released in September said all three companies share responsibility for the disaster, which led to more than 200 million gallons of oil being released into the Gulf of Mexico.
Chevron admitted responsibility for the Atlantic oil spill off Brazil's coast in a statement Sunday but said it was still trying to calculate how much oil had leaked at its exploration site off Rio de Janeiro.
Brazil's National Petroleum Agency had estimated the total volume of oil released at between 5,000 and 8,000 barrels (between 210,000 and 336,000 gallons), according to Chevron.
"Chevron takes full responsibility for this incident," Chevron Brazil country manager George Buck said in the company's statement. "We are committed to deploying resources until the sheen can no longer be detected."
Over the weekend, Minc accused Chevron of underestimating the amount of oil that had leaked.
Buck denied that accusation, telling Agencia Brasil that it was difficult to define the real dimension of the problem.
Last week Brazil's Federal Police agency said it was investigating the spill, saying those responsible could face sentences of up to five years in jail if found guilty.
Brazil's oil and gas regulator has said the spill is dispersing and moving away from the Brazilian coast, so it does not appear to threaten Rio's world-famous beaches. But it does raise questions about how prepared Brazil is for the development of its offshore "pre-salt" deposits, which are expected to turn the country into a major oil exporter in the coming years.

Technip and Odebrecht Óleo & Gás receive award for 2 flexible pipeline installation vessels

Date: 11/18/2011

The joint venture formed by Technip (50%) and Odebrecht Oil & Gas (OOG, 50%) has received a letter of award from Petrobras for the charter and operation, during a fixed period of five years, of two identical flexible pipeline installation vessels for a value of approximately USD 1 billion.

Characterized by their high pipelay tension capacity of 550 tonnes, the twin vessels will be employed principally to install umbilical and flexible flowlines and risers to connect subsea wells to floating production units in waters up to over 2,500 m deep offshore Brazil, including in the pre-salt area. The provision of installation engineering services is included in a JV´s scope.

Technip and OOG have formed a JV project team which will manage the construction of the vessels at the Daewoo Shipbuilding and Marine Engineering shipyard in the Republic of Korea (South Korea) where OOG is currently completing the construction of the third and the fourth of 4 drilling units. Subsequently, vessel operations and the provision of marine management and engineering services during the charter phase will be handled by the JV in Rio de Janeiro.

Jorge Luiz Mitidieri, Executive VP of OOG, stated "OOG was the only national company pre-qualified to participate in the bid and this award further strengthens and consolidates OOG´s presence in the Subsea market where we have invested heavily in capacity and skills since our decision to enter the segment in 2009. Our proven track record in the construction and operation of offshore drilling assets and our partnership with Technip are key to the success of the project and we believe will provide significant potential to leverage synergies in the management and operation of the vessels and mitigate risks during project execution. This opportunity was also an important indication that our client Petrobras trust in our expertise and capability to deliver and serve".

Frédéric Delormel, Executive Vice President and COO Subsea of Technip, declared "Technip has relentlessly maintained a leading presence in subsea production development offshore Brazil since 1977 and we are extremely pleased to be at the forefront of this new phase of Petrobras development into deeper and more challenging waters. Odebrecht has a similar tradition, coupled with a solid track record in the recent and ongoing delivery of deepwater drilling units with DSME. We fully expect that this robust partnership and the distinguishing characteristics of these new assets will enable the cost effective supply of high local content flexible and umbilical subsea productions solutions to Petrobras for decades to come".

Petrobras strike - Accidents in Petrobras offshore oil platforms

Workers at Brazilian state oil company Petrobras will go on strike on 16 November to demand safer working conditions and better pay, union leaders said on Monday, in a conflict that may push global oil prices higher.

A series of accidents on Petrobras offshore oil platforms and fallout from the massive BP oil spill in the Gulf of Mexico have led Brazil's oil workers to step up demands for better safety standards on offshore platforms.

"In seven rounds of negotiations, the company ignored workers demands ... principally with respect to the issue of security," the FUP oil workers umbrella union said.

It noted the strike would go on "for an undetermined amount of time", according to Reuters.

A full-blown work stoppage could force Petrobras to boost crude imports to keep refineries running and meet booming fuel demand in Brazil, the world's seventh-largest economy.

It could also trim Petrobras' exports, putting upward pressure on crude oil prices that have rallied in recent weeks on hopes of a resolution to the euro zone crisis.

But the union's threat may not lead to a strike, and if it does action may be limited. Brazilian labour law places restrictions on strike action that could halt operations at economically essential or potentially dangerous installations, a category that applies to much of the Rio de Janeiro-based company's operations.

Petrobras also faces pressure from shareholders to avoid work stoppages that could reduce cash flow as it carries out a $225 billion five-year expansion plan, the world's largest corporate spending programme.

In 2008, union leaders called off a planned strike after Petrobras offered to increase profit sharing with workers.

The FUP said on Monday it is seeking a salary increase equal to inflation plus 10% and "a security policy that defends life".

Petrobras said in an emailed response that it had offered a 9% salary increase and a bonus of 90% of one month's salary, Reuters reported.

Brazilian inflation is running at an annual rate of about 7%.

"The company made offers on several items related to the health and retirement plans of the employees, (and) safety conditions, among other issues," the company said.

A strike would follow similar labour stoppages in recent weeks by Brazilian workers including bank and postal employees seeking a greater share of the country's economic growth.

Continued union demands for higher wages have boosted worries that salary increases could spur Brazil's inflation that is already running above the government's target.

Petrobras has faced growing complaints from unions about conditions of platforms, particularly older platforms in the Campos basin where most of Brazil's oil is produced.

The labour ministry in May ordered Petrobras to shut the P-65 platform on safety concerns. A fire on a diesel fuel tanker killed one worker in September.

Petrobras halted platforms in January and February this year following a brief fire and a gas leak.

Petrobras is a net exporter of oil but still imports crude to meet technical limitations of local refineries. Most of Brazil's output is heavy crude which is harder and more expensive to refine that lighter grades.

The company imported 376,000 barrels per day of crude in the first half of 2011, compared to crude exports of 461,000 bpd in the same period.

Brent crude prices rose on Monday to their highest level in more than seven weeks, driven by hopes for resolution to Europe's debt crisis and worries about Iran's nuclear program. US crude futures gained for a fourth day in a row to settle at the highest level in 14 weeks.

Petrobras' chief financial officer Almir Barbassa said earlier this year that the company has seen an increase in government-ordered platform shutdowns in the wake of the Gulf of Mexico spill, considered one of the worst environmental disasters ever in the US.

The company insists its operations are safe.

Petrobras to triple crude exports in 2020 - CEO

SINGAPORE, Nov 1 (Reuters) - Petrobras expects to
triple crude exports to between 1.5 million and 1.6 million
barrels per day (bpd) by 2020, with CEO Jose Sergio Gabrielli on
Tuesday naming the United States and China as the firm's key
markets.
The Brazilian state oil firm expects to boost crude output
to 3.9 million bpd by 2015 and 4.9 million bpd by 2020 from 2.1
million bpd this year, which would make Brazil one of the
world's three largest oil producers, Gabrielli said.
"We are forecasting to become a very big net exporter by
2020, not only of oil products but also of crude," Gabrielli
told the Singapore International Energy Week conference.
Petrobras currently exports 520,000 bpd of crude.
Crude oil exports to the United States and China would
double to 400,000-450,000 bpd each, he added.
"China is going to be the same size as the United States.
Right now they are about the same at about 200,000 bpd to
220,000 bpd of exports. That will be growing to about twice that
size. We hope that we can also increase exports to other Asian
countries," he said.
Global fuel consumption would grow around 3-4 percent for
the next five years, Gabrielli said, which would support prices
in the long term.

Petrobras plans to spend more than half of its 2011-2015
capital expenditure of $225 billion to tap the ultra deep-water
subsalt, an area the size of New York state which is believed to
hold at least 50 billion barrels of oil.
Refining, transport and sales activities will account for 31
percent of total investment. "Our main challenge is to extract
resources," Gabrielli said.
The company will ramp up output at its pre-salt Lula field
to 120,000 bpd, up from 36,900 bpd now, when a second well is
added next year, he said.
Petrobras assumes a Brent oil price of between $80 and $95
per barrel for cash flow purposes, Gabrielli said.
"At $80 we can generate $125 billion net cash flow after
payment of dividends and at $95 we can generate $149 billion in
next five years of net cash flow," he said.
To raise funds, Petrobras has also earmarked $13.6 billion
worth of assets to sell as part of the five-year investment
plan.


DOWNSTREAM
Brazil will continue to import gasoline and diesel before
the first of four new refineries start up in 2013, Gabrielli
said.
Gasoline imports tripled this year after ethanol prices
surged while Brazil buys 600,000-1 million bpd of diesel from
India each month, Petrobras executives said.
Four new refineries will add 1.4 million bpd of oil products
output, the CEO said, lifting refinery capacity to around 3.2
million bpd by 2020.
Gabrielli forecast total product exports in 2020 to reach
67,000 bpd.
He said that the company's crude refining will account for
39 percent of Latin America's total projected capacity by 2016.
The vast majority of Petrobras' revenue comes from sales in
Brazil.
Petrobras plans to double its share of Brazil's
ethanol market to 12 percent in 2015 by nearly quadrupling its
ethanol output to 5.6 million cubic metres, Gabrielli said. It
produces 1.5 million cubic metres of ethanol now.


Table of Petrobras refinery projects
Refinery Capacity (bpd) Start-up date
Abreu E Lima 230,000 2013
Comperj (1st train) 165,000 2015
Premium I (1st train) 300,000 2016
Premium II 300,000 2017
Comperj (2nd train) 165,000 2018
Premium I (2nd train) 300,000 2019
Total 1,460,000
Source: Petrobras

Oil's first major petrochemical company makes its mark

04 November 2011 10:33 [Source: ICB]

Braskem intends to expand its operations - while staying true to its Brazilian roots

Brazil's leading petrochemical company is making an impact on the global stage through acquisitions, innovation and investment

Brazilian polymers major Braskem is delivering on its promise to expand into new territories. The company is implementing projects in Mexico and Venezuela, and also has production plants in the US and Germany following the acquisition of US-based Sunoco's polypropylene (PP) business in 2010 and US-based Dow Chemical's PP business this year.
With the purchase of the Dow PP business, Braskem says it has become the leading PP producer in the US, the world's largest PP consuming country, with 1.425m tonnes/year of capacity. The acquisition, concluded in September, gives Braskem two plants in the US (Freeport and Seadrift, both in Texas) and two in Germany (Wesseling and ­Schkopau). The Sunoco PP acquisition gave Braskem its "initial beachhead" in the US, says Luiz de Mendonca, executive vice president for the company's international business. "With the Dow acquisition, we are able to expand that presence."
Further investments in the US could involve expanding into new product areas beyond PP, he suggests. Braskem, like most petrochemicals producers with operations in North America, is monitoring opportunities to invest in new ethylene capacity to take advantage of the rich ethane reserves in the Marcellus Shale natural gas deposit, which is largely concentrated in Pennsylvania.
"Our strategy is focused on the Americas, which has advantaged feedstock," he says. "Look at the new reserves in Brazil, US shale reserves and the gas cracker project in Mexico, as well as the potential of countries such as Venezuela and Peru." Owning the Dow PP plants in Germany also will allow Braskem to participate in the European market as a local player. But Braskem's growth strategy will ­remain focused on the Americas, Mendonca went on to add.
Braskem is implementing a cracker and polyethylene (PE) project in Mexico and a PP project in Venezuela. The Mexican project, Ethylene XXI, is more advanced. A joint venture with Mexico's Idesa, it comprises an ethane cracker plus three downstream PE units with a combined 1.05m tonne/year capacity. The project is located in Veracruz province and will primarily supply the Mexican market, as well as the US Gulf Coast. Start-up is scheduled for 2015.
In Venezuela, Braskem has two projects, one for PP and another for PE, in partnership with state-owned chemicals producer Pequiven. But progress has been slow and, while work on the PP project is continuing, the PE project has been put on hold.
Propilsur, the PP joint venture created by Braskem and Pequiven, has moved the PP project to Paraguana in Venezuela's Falcon state so it can receive propylene feedstock from the Paraguana refinery complex. The project is now expected to have a minimum capacity of 300,000 tonnes/year. Braskem says engineering work is underway.
Mendonca acknowledges that the ­Venezuelan projects have taken longer than expected, but says this is not unusual for such large-scale projects.
The Rio Polimeros (Riopol) project in ­Brazil, which has been integrated into Braskem, took 10 years to develop, "and the Mexico project has been up and down for 20 years," he says. "We are creating a new industry [in Venezuela] and such a long lead time is ­absolutely normal."
It is important for Braskem to have a ­presence in Venezuela, the region's main oil-producing country, he stresses.
The Venezuela PP project is progressing faster than the PE project because it has a ­simpler configuration. The PP project will take its feedstock from existing refineries while the PE project involves gas separation to produce the ethane, plus an ethane cracker, Mendonca explains.
BRAZILIAN GROWTH
As well as pursuing overseas projects, Braskem is expanding its Brazilian operations to take advantage of the booming economy and expected growth in resins demand. Projects include a polyvinyl chloride (PVC) plant in Marechal Deodoro, Alagoas, in northeast Brazil, and a butadiene (BD) project in Triunfo in the southern state of Rio Grande do Sul. In the longer term, Braskem intends to ­invest in the Comperj petrochemicals project being implemented by parent group Petrobras in Itaborai in the southeastern state of Rio de Janeiro.
Braskem is optimistic about resins demand growth in 2012, although demand this year has been disappointing. Brazilian gross domestic product (GDP) is forecast to grow by 3.5% in 2012, and resin demand is expected rise at a higher rate, says Rui Chammas, Braskem's vice president for polymers. GDP growth is also forecast for most other South American countries, he notes.
This year, Brazilian resins demand has been slower than expected, says Chammas. Last year ended with strong expectations for economic growth and with high inventory levels across the resins supply chain, but growth was slowed as a result of budget controls implemented by the Brazilian government under the new president Dilma Rousseff, he explains.
With lower-than-expected economic growth, inventory levels in the plastics supply chain were adjusted and, as a result, resins ­demand was flat in the first half of this year. Demand has improved in the third ­quarter, Chammas notes, and is more in line with expectations.
State-owned energy group Petrobras's Comperj refinery and petrochemicals project is expected to help meet rising domestic resins demand in the second half of the decade.
The project includes downstream plants for PE, PP, styrene, ethylene glycol (EG), benzene and paraxylene (PX). Braskem intends to partner Petrobras in the ethylene cracker and polyolefins projects. The petrochemicals part of the Comperj project is expected to start up in 20162018 (see below). "Comperj will provide important new ethylene production in Brazil. It's important for us to be part of that," says Chammas.
Petrobras said in August that it has reconfigured the project, resulting in increases in capacities for PE and PP. The project, which will include a second refinery, is expected to have the capacity to produce 960,000 tonnes/year of PE and 900,000 tonnes/year of PP.
Precise details of the cracker and poly-olefins projects have yet to be defined, says Chammas. "Braskem and Petrobras are ­working on the detailed configuration of the complex", he says.
To meet rising domestic and regional ­demand until the Comperj project comes on stream, Braskem is investing in debottleneckings and new production plants for PE, PP and polyvinyl chloride (PVC) in Brazil, says Chammas. A 200,000 tonne/year PVC plant is scheduled to start up in Alagoas next year, raising Braskem's PVC capacity at the site to 460,000 tonnes/year. The company is also planning a 100,000 tonne/year BD project in Triunfo. The plant is expected to begin ­production in 2013, boosting Braskem's BD capacity by 30%.
The third pillar to Braskem's growth ­strategy, in addition to domestic and international growth, is the development of bio-based materials (see article on bio-based materials on page 19).
The company already produces bio-based ethylene from sugarcane ethanol for the production of green PE, and is studying a second, larger-scale green PE project. It also plans to produce propylene from bio-based ethylene for the production of green PP.
To succeed with such ambitious projects requires an entrepreneurial spirit, suggests Mendonca. "For the green PE production, we have the feedstock in Brazil, the plant in ­Brazil, most of my clients are in Europe and a lot of the research is being conducted in the US. To put all that together requires an ­entrepreneurial type of company."
For the Mexican project, too, Braskem had to take risks.
The project had been on the drawing board, in various incarnations, for more than 10 years, with Braskem appearing as a late entrant in 2008. Key to the project's success was the development of a different feedstock pricing model with ­Mexico's state-owned energy group Pemex, Mendonca says.
Taking advantage of the shale gas play in the US also will require a different risk profile to that of a traditional chemicals company, he adds.
Keeping up with Brazilian demand also will be challenge. Resins demand is expected to be boosted as a result of huge investments in infrastructure as the country prepares to host the World Cup in 2014 and the Summer Olympics two years later.
But for Braskem, it is not enough to focus on the domestic market, says Mendonca. "We need to expand our reach beyond Brazil."
COMPERJ PROJECT DEVELOPS
BRAZILIAN STATE-owned energy group Petrobras has reconfigured its Comperj refinery and petrochemicals complex in Itaborai, Rio de Janeiro.
The project will include a second refinery and will use ethane, in addition to naphtha, as feedstock for its ­petrochemicals production.
With the additional ­feedstock, the polyethylene (PE) capacity will be raised to 960,000 tonnes/year instead of 800,000 tonnes/year, while the PP capacity will be 900,000 tonnes/year instead of 850,000 tonnes/year.
Braskem, which is part-owned by Petrobras, will partner the state-owned company for the polyolefins projects.
Petrochemicals production at Comperj will also include 400,000 tonnes/year of styrene, 380,000 tonnes/year of ethylene glycol (EG), 154,000 tonnes/year of BD, 355,000 tonnes/year of benzene and 480,000 tonnes/year of paraxylene (PX).
Petrobras said the project will no longer include polyethylene terephthalate (PET) production. Instead, the company is expected to supply PX ­output from Comperj to its new PET and fibers complex under construction at the Port of Suape in Ipojuca, Pernambuco, northeast Brazil.
The group has already started construction work on the Comperj project and expects to start up the cracker, one PP train and the remaining downstream petrochemicals plants in 2016. A second PP train is scheduled to start up in 2018.
Petrobras said the addition of a second refinery train reflects increased demand for refinery products.
The first refinery is scheduled to start up in 2013 and the second in 2018.