SBM Chief Sees ‘Good Chance’ Petrobras Contract Will Proceed

April 19, 2010, 10:24 AM EDT


April 19 (Bloomberg) -- SBM Offshore NV, the world’s largest producer of floating oil-production platforms, said there’s a “very good chance” an order valued at as much as $1.5 billion from Petroleo Brasileiro SA will go ahead.



On April 13, SBM received a letter of pre-commitment from the Brazilian company for an offshore production unit in the country’s pre-salt area. “We think there’s a very good chance this project will proceed,” Chief Executive Officer Tony Mace said in an interview a day later. The contract would cover a 20- year lease, valued at $1 billion to $1.5 billion, he said.

SBM, based in Schiedam, Netherlands, is expanding in Brazil as exploration gathers pace in the pre-salt region, which runs 500 miles along the coast from Espirito Santo to Santa Catarina states. In December SBM won a $1.7 billion, 18-year contract from Petroleo Brasileiro, or Petrobras, for a floating production unit. Brazil accounted for almost half of SBM’s revenue last year, according to data compiled by Bloomberg.
Petrobras plans to spend as much as $220 billion through 2014 as it taps offshore reserves, including the Tupi field, the largest oil discovery in the Americas in more than 30 years. SBM, which supplies oil producers including BP Plc and Royal Dutch Shell Plc, is investing in vessels in the expectation that clients will increase spending as crude prices rise.


Oil futures are trading above $80 a barrel in New York, a 76 percent gain from a year ago.
“There’s potentially a lot of further business to be had in Brazil, both on sale and potentially on lease business,” Mace said. “We will assess how much of our revenue and how much risk essentially of the company we will allow ourselves to place in Brazil.”
The pre-salt area has oil beneath a layer of salt resting as much as 3,000 meters (9,840 feet) beneath the ocean surface and another 3,000 to 5,000 meters below the seabed.