GranEnergia Strikes US$500mn Platform Deal With Petrobras

Brazil - Oil & Gas - 11 Oct 2013 - Petrobras

Brazilian oil and gas logistics firm GranEnergia has agreed to build three offshore maintenance platforms in Brazil for state-owned oil company Petróleo Brasileiro (Petrobras) with an investment of US$500mn. As part of the deal, the first unit, dubbed Olympia, will begin operating in the Campos Basin, offshore Brazil, in early 2014; the second platform, Venus, is scheduled to start in Q414; while the third unit, Themis, is expected to come online in April 2015. GranEnergia is an energy arm of Brazilian holding company GranInvestimentos controlled by the Gradin family.

Chevron Settles Brazil Spill for $41.6M

Integrated energy behemoth, Chevron Corp. recently entered into an agreement with prosecutors in Brazil for settlement of lawsuits concerning an oil spill, off the country’s coast of Rio de Janeiro.

Per the contract, Chevron is liable to pay $41.6 million as compensation for the spillage of about 3,000 barrels of crude oil in Nov 2011, during the drilling activities at the Frade oil and gas field. The field is based 370 kilometers offshore Rio de Janeiro and at a water depth of approximately 1,128 meters.

Frade field produces 60,000 barrels of oil every day and is believed to have recoverable oil of 200 to 300 million barrels. Chevron is the operator of the field with 51.74% ownership, while Brazilian energy giantPetrobras SA  retains 30% interests in it. The remaining 18.26% is owned by Frade Japá o Petròleo Ltda.

As part of the deal, Chevron will have to take precautionary measures to ensure that no such incident is repeated in the future. The closure of the deal is however, subject to the approval of the federal court.

Chevron was utilizing the rig of  Transocean Ltd. , an offshore drilling giant, when the oil-spill incident occurred. However, as per the contract, Transocean will not have to pay any charges on account of the accident.

Regulatory government authorities concluded that damages owing to the oil spillage were not that grave, contrary to what they had originally thought. As a result, Chevron will have to make a payment of only $41.6 million, which is far below the Brazilian prosecutors’ initially estimated figure of $20 billion. Moreover, the aforesaid payment agreed upon by Chevron takes care of all the damage claims charged by the federal prosecutors of Brazil.

Petrobras signed the agreement for P-75 and P-77

The agreement for the construction of platforms P-75 and P-77 was signed on Monday (Sept. 16), at Palácio Piratini, in Porto Alegre, with the RIG Consortium, which is formed by Queiroz Galvão, Camargo Correa, and IESA. The ceremony was attended by the President of Brazil, Dilma Rousseff, and our CEO, Graça Foster.

The President remarked that ten years ago nobody believed that Brazil could have a naval hub. "Rio Grande do Sul now has a naval hub that shows the ability and strength of a policy that decided it was indeed possible to produce in Brazil," said Rousseff, highlighting the importance of the growth of the Brazilian oil and gas industry supplier chain.

In her address, Graça said that in 2013 we will conclude eight platforms that will help us achieve the goal of doubling production by 2020. "We have 90% contracted in order to be able, in 2020, to double what we produce today, in other words, to reach 4.2 million barrels," she said. She also praised the Brazilian shipbuilding industry: "The learning curve is spectacular. We are very near becoming one of the greatest centers of excellence in the world again."

FPSOs P-75 and P-77

FPSOs (platforms that produce, store and offload oil) P-75 and P-77, with production capacities of 150,000 barrels per day each, will be deployed in Transfer of Rights blocks, in the Santos Basin pre-salt layer, along with two other similar units, the P-74 and P-76. The RIG Consortium will be in charge of building the modules of and integrating both platforms. The work will be done at the Honório Bicalho shipyard, in Rio Grande.

The vessels intended to have their hulls converted to the P-75 and P-77 are at the Cosco Shipyard, in China, undergoing hull preparation services, and are expected to arrive in Rio de Janeiro (RJ) in the second half of 2014, where the conversion works will be performed at the Inhaúma Shipyard. Upon the completion of this step, the hulls will go to Rio Grande. The P-75 is slated to arrive in Rio Grande in the second half of 2015, while the P-77 in the first half of 2016. The works are expected to create approximately 4,400 direct and indirect jobs at the peak of activities. The contractual domestic content is foreseen to be 65% to 71%.

ABB wins contract to construct indoor transmission substation in Brazil

Furnas Centrais Eletricas has awarded a contract to ABB for construction of a new indoor transmission substation to power the Maracana soccer stadium in Rio de Janeiro, which will host the final of the 2014 FIFA World Cup.

Covering design, supply, install and commission a new indoor substation for replacement of the existing installation in Grajau, the $30m contract will also supply power to the neighborhood surrounding the stadium.

In addition, the company will install IEC-61850 substation automation, control and protection systems to facilitate both local and remote control and monitoring.

ABB Power Systems division head Brice Koch said the substations will allow additional power supplies required during the forthcoming global sporting events and will also reinforce the country's transmission grid for the future.

''ABB has the range of technologies, the experience and the project management capabilities to support the country in its efforts to strengthen its power infrastructure,'' Koch added.

The 63 kilo-amperes substation can be constructed on the same plot of land as the existing substation due to GIS's compact footprint.

Brazil's ANP Approves Development Plan for Oliva Oil Field

Brazilian oil companies Barra Energia, QGEP Participacoes SA (QGEP3.BR) and OGX Petroleo e Gas Participacoes SA (OGXP3.BR) received approval to develop the Oliva offshore oil field, Barra Energia said Tuesday.

The Oliva field sits in the same area where billions of barrels of crude oil were found trapped under a thick layer of salt off Brazil's coast, and the three companies eventually hope to drill into the pre-salt layer. Oliva and a sister oil field known as Atlanta are above the salt layer.

Barra Energia, QGEP and OGX earlier this received similar approval to develop the Atlanta field, which is estimated to hold recoverable reserves of about 260 million barrels. Oliva is considered about half the size of Atlanta, although no estimates of recoverable reserves have been released.

Development of Atlanta and Oliva continue QGEP's emergence as a growing player in Brazil's offshore oil industry. The firm currently produces natural gas from the Manati offshore field, while first oil from Atlanta is expected between the second half of 2014 and the first half of 2015. First oil is expected to be produced at Oliva in 2021, Barra Energia said.

The approval could also help troubled OGX regain some credibility. OGX has suffered from lower-than-expected production and operational problems at its Tubarao Azul field. The issues at Tubarao Azul created a crisis of confidence for controlling shareholder Eike Batista's EBX Group of companies as investors grew concerned that many of the start-up firms would be unable to produce concrete returns. OGX is currently restructuring its debts.

Barra Energia holds minority stakes in several promising offshore areas but doesn't yet produce any oil.

QGEP operates the BS-4 block with a 30% stake. Barra Energia owns 30%, while OGX holds the remaining 40% after buying out state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR) for $270 million last November.

QGEP shares were down 0.6% at BRL11.78 in early afternoon trading, while OGX shares were up 2.5% at BRL0.41. Barra Energia is closely held.

EIG may bid for more of Brazilian Batista's troubled EBX group

EIG Global Energy Partners LLC is interested in buying more assets from troubled Brazilian tycoon Eike Batista, a person familiar with the U.S. investment company's plans said days after it closed a $544 million deal that gives it control of a major new port.

EIG, however, is not actively negotiating with Batista's Rio de Janeiro-based EBX Group, said the person, who declined to specify which assets the $12.8 billion investment-management firm has its eye on.

Forced by debt woes to dismantle an energy, port and mining empire that had been worth $35 billion last year, Batista is seeking partners or buyers for oil company OGX Petróleo e Gás Participações SA, iron ore miner MMX Mineração e Metálicos SA, shipbuilder OSX Brasil SA and coal miner CCX Carvão da Colombia SA.

EIG declined to comment. EBX executives were not immediately available for comment late on Sunday.

EIG, seeking to profit from a Brazilian oil rush, said last week it will buy 1.3 billion reais ($544 million) of new stock in port operator LLX Logística SA to help complete the Port of Açu, a giant complex north of Rio de Janeiro. EIG approached Batista about a possible deal for the port around six to seven weeks ago, the person said.

The port will ease transport bottlenecks for Brazil's commodities producers and provide a home for factories, power plants and oil storage and processing facilities. It will also serve as a base to help develop a giant new offshore oil play known as the Brazilian subsalt.





Last year, EIG also agreed to invest 500 million reais, then worth $280 million, in Sete Brasil, which is building 28 deep-water drilling rigs for Brazil's state-led Petroleo Brasileiro SA, or Petrobras.

EIG got the LLX assets for a fraction of what they could be worth if the Port of Açu realizes its potential. Companies such as U.S.-based General Electric Co, which builds power plants for offshore oil platforms, and France's Technip , a major offshore oil engineering contractor, have agreed to buy land at the port.

EIG expects the Port of Açu will be busy serving Brazil's state-led Petroleo Brasileiro SA, or Petrobras and partners such as Britain's BG Group Plc and Spain's Repsol SA.

The subsalt oil reserves they have discovered, named for their location beneath a layer of salt, runs along Brazil's coast near Rio de Janeiro and may contain 100 billion barrels of oil, according to the Brazilian Petroleum Institute at Rio de Janeiro-State University. That's enough to supply more than 14 years of U.S. needs at current consumption levels.

"The landing point for all of that oil is Açu port," the person said. "It's a crown jewel."

Many expect the region to attract more than $500 billion of investment over the next decade and that Brazil will as much as triple output to more than 6 million barrels a day, helping Brazil surpass the United States as the world's No. 3 oil producer after Saudi Arabia and Russia.

This isn't the first time EIG has been in the spotlight in the wake of a corporate melt-down. In the weeks before Chesapeake Energy CEO Aubrey McClendon was stripped of his chairmanship over his personal financial dealings, he arranged an additional $450 million loan from EIG, a long-time backer of McClendon's and Chesapeake's. In total, EIG since 2010 lent McClendon $1.33 billion.

EIG, which was spun out of the Los Angeles-based bond investor TCW in 2011, has not made any personal loans to Batista, the person said.



When restructuring of EBX ends, Batista will be left with between $1 billion to $2 billion of assets and $1.7 billion of long-term debt, a person who has direct knowledge of EBX plans has told Reuters. His empire once was valued at over $60 billion.

Brazil to Approve 12th Round Natural Gas Concession Auction

Brazil's National Energy Policy Council was expected to approve Tuesday an auction of natural gas concessions scheduled for November, said the director of the country's National Petroleum Agency, or ANP.

The ANP will put up for bid 240 exploration blocks in seven inland basins at the auction, the ANP's Magda Chambriard said. The blocks are focused on natural gas exploration, including so-called non-conventional deposits similar to the shale deposits being tapped in the U.S.

State-run oil company Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras, has been evaluating Brazil's non-conventional natural gas potential since last November, said Jose Formigli, Petrobras's exploration and production director.

Petrobras has been working "heavily" to identify promising areas and ways to reduce drilling costs to make developing such deposits viable, Mr. Formigli said. Some of the areas are very remote, so Petrobras wants to have a good idea about the best way to turn the natural gas into cash, the executive added.

The new Pascuales-Cuenca 210 kilometers pipeline

Ecuador--Four companies, including Sinopec International Petroleum Service Ecuador S.A., the local unit of China state-owned Sinopec, and Brazil's Norberto Odebrecht, have submitted bids for a tender to build a 46,000 barrels per day multipurpose oil pipeline project in Ecuador, state-run company Petroecuador said.

Petroecuador said Consorcio International PPC and ICC Conkor also submitted offers.

The new Pascuales-Cuenca 210 kilometers pipeline will be located in the southern Ecuador. It will run from the port city of Guayaquil to Cuenca. It will supply diesel, gasoline and liquefied petroleum gas to six provinces in Ecuador.

Petroecuador will make the technical and economic evaluation of the proposal public at the end of August.

Petroecuador didn't provide details on the cost or construction timeline.

New pipelay orders for Huisman with major offshore contractors

Huisman has secured new contracts for 10 pipelay systems with various major offshore pipelay contractors. The new contracts include:
Three 550 t Tiltable Lay Systems (TLS) and one 325 t Vertical Lay System (VLS) for Subsea 7.
Two 650 t TLS and two 340 t VLS for Technip-DOF.
One 275 t VLS and one 570 t Multi-lay System for Ceona.

The equipment will be built at the various Huisman production facilities in the Netherlands, Czech Republic, China and Brazil. Delivery of these pipelay systems is scheduled between the end of this year and early 2017.
Orders for Subsea 7 and Technip-DOF

The orders for the 3 x 550 t TLS for Subsea 7 and the 2 x 650 and 2 x 340 t TLS for Technip-DOF are all part of those companies’ contracts with Petrobas.

The three Subsea 7 TLS will all be equipped with a sophisticated Huisman squeeze system to accurately control squeeze loads. Moreover, all tensioners will be retractable, which allows for safe and efficient installation of large subsea infrastructure components such as umbilicals, risers and flowlines.

The vessels for Subsea 7 will be built by IHC, the Netherlands.

Technip-DOF’s order for two TLS includes baskets and 2 x 50 t SMST knuckle boom cranes, which allow for deck handling and deepwater operation.

The vessels for the 2 x 650 t will be built by VARD in Norway and the vessels for the 2 x 340 t will be built by VARD in Brazil.

Delivery of the final pipelay system for these orders is scheduled for early 2017.

An additional contract for Subsea 7 includes a 325 t VLS for its newly built DP3 heavy construction and flexible pipelay vessel, which will be built by Korean shipyard Hyundai Heavy Industries Co. Ltd. Besides the pipelay system, Huisman will also deliver a 600 t AHC subsea crane for this vessel. Delivery is scheduled for 2015.
Orders for Ceona

The orders for Ceona include pipelay systems for the company’s vessels the Polar Onyx and theCeona Amazon.

The latter, a multi-function, dynamically positioned construction vessel, will be built based on a Huisman vessel design. The highly integrated and fully optimised vessel will have exceptional sea keeping characteristics, with a maximised deck area and a weather window with limited vessel dimensions.

This design includes a project area of 4600 m2, which allows for further storage of line pipe and standard flexible installation reels.

The pipelay system consists of an inclinable lay system with a top tension of 570 t and a rigid pipeline firing line system. The vessel can lay rigid pipelines, flexible pipelines and umbilicals, and can install large subsea structures using one or both of her 400 t subsea cranes, also built by Huisman.

The Ceona Amazon will be built by Lloyd Werft, and the Huisman equipment is scheduled for delivery in 2014. The 275 t VLS for the Polar Onyx will be delivered in 2014 as well.

Agito AS opens office in Brazil

Agito AS, a world-leader in providing modeling and simulation of complex dynamic systems, is pleased to announce the opening of Agito Technical Dynamics do Brasil. Brazil is one of the major regions for development of offshore oil & gas production, and this office will meet the increasing demand for dynamic analysis in the region and ensure that our clients in Brazil receive local representation.  

Agito, with more than 15 years of experience, have the resources available to complete modeling and simulation analyses of hydraulic, electrical, and fluid systems. Drawing on resources from our offices in United States, United Kingdom and Norway, Agito provides support at all project levels from initial studies to final testing and verification. Using CAE software that meets the specific needs of the offshore/subsea industry, Agito performs dynamic analyses and optimization of critical functions in complex systems, including detailed reporting. 

The software, SimulationX®, developed by ITI GmbH in Germany, is the trend-setter in physical system simulation. It was the first universal CAE tool with a subsea specific library. The library, developed by Agito and ITI, has ready to use subsea component models such as: umbilicals, subsea control modules, subsea valves, deep-water accumulator, subsea compensators and ROV stabs.  The next step, an electrical subsea library, is in the final stages of development, and will be available for commercial use at the end of this year.

“CAE tools, such as SimulationX®, allow one to test a system virtually before putting it into production. It is an essential supplement which helps engineers design a better product at a lower cost. The simple user interface allows for simulation projects to be performed in-house.  Alternatively Agito’s team of experts can complete your projects.”, as mentioned by Carlos Witte, Vice President of Agito Technical Dynamics do Brasil.

Wind Power - Alstom inaugurates its first wind tower factory in Latin America

Installed in Canoas in Rio Grande do Sul State, South part of Brazil, the site will have the capacity to produce 120 steel towers per year, enough to supply approximately 350 MW of electricity. This factory will supply the southern region of Latin America, a market currently experiencing strong growth. The ceremony was attended by Tarso Genro, Governor of Rio Grande do Sul State, and other local authorities.

“The geographical position of the plant allows us to be close to our customers and enables important interaction with other countries such as Argentina, Chile and Uruguay. We have a long and established history in the wind markets of Latin America, and we continue to invest in the region to meet its growing power needs.” explained Marcos Costa, Country President of Alstom Brazil.

It is Alstom’s second wind manufacturing unit Latin America, following the commissioning of its first wind nacelle plant in Camaçari, State of Bahia, in November 2011. The Camaçari unit has the capacity to manufacture 600 MW of wind turbines per year.

Spanning approximately 11,000 m², beside Alstom’s Grid power transformers and shunt reactors unit(1), the new plant will employ 90 people and could generate an additional 250 indirect jobs in the region. The Canoas plant will produce towers dedicated to the Corredor do Senandes complex, the first wind project of Odebrecht Energia which will have 108 MW of installed capacity.

A few months ago, Alstom signed a partnership with Renova Energia. The agreement – the biggest within the global onshore wind market – could potentially generate around one billion euros in orders for Alstom, through the installation of at least 1.2 GW in projects.  The companies have already signed a contract for 513 MW as part of the frame agreement.

Operations in the Pre-Salt - Petrobras

The discoveries made in the Pre-Salt raise us to a new level of reserves and oil production, ranking us in a prominent position among the major energy companies.

With the experience they have acquired developing fields nestled in deep waters, our technicians are now ready to develop the accumulations discovered in the pre-salt.

To this end, they are already adapting the technology and the logistics the company developed through the years. The goal is to achieve, by 2017, a daily production in excess of a million barrels of oil in the Pre-Salt areas we operate.

1. What is the pre-salt?

The expression "pre-salt" makes reference to an aggregation of rocks located offshore in a large portion of the Brazilian coast and with potential to generate and accumulate oil. It was called pre-salt because it forms a rock interval that ranges under an extensive layer of salt which, in certain areas of the coast, can be as much as 2,000 meters thick. The "pre" expression is used because, through time, these rocks were deposited before the salt layer. The total depth of these rocks, i.e., the distance between the surface of the sea and the oil reservoirs under the salt layer, can be as much as 7,000 meters.

Petrobras recently made the biggest oil discoveries in Brazil in the pre-salt layer located between the states of Santa Catarina and Espírito Santo, where major volumes of light oil were found. The oil that has already been found in the pre-salt layer in the Santos Basin, for example, has a specific gravity of 28.5o API, low acidity and low sulfur contents. These are the hallmarks of a high-quality oil with a higher market value.

2. What is the estimated volume of oil found in the pre-salt accumulations discovered thus far?

The first results indicate very large volumes. Just to have an idea, the Tupi accumulation alone, located in the Santos Basin, has recoverable volumes estimated at 5 to 8 billion barrels of oil equivalent (oil plus gas). Meanwhile, the Guará well, also in the Santos Basin, holds 1.1 to 2 billion barrels of light oil and natural gas, at a specific gravity of approximately 30o API.

3. Are the recent discoveries made in the pre-salt economically feasible?

Based on the results obtained from the wells that have been drilled and tested thus far, there is no doubt regarding the technical and economic feasibility of the commercial development of the accumulations that were found. The technical studies that have already been carried out for the development of the pre-salt, associated to the mobilization of specialized service and equipment resources and logistics, allow us to guarantee this venture will be successful. A few important stages in this process have already been overcome: in May 2009, Petrobras kicked-off the extended well test for the Tupi area, capable of processing some 30 barrels of oil per day. A month later, the Capuava Refinery (Recap), in São Paulo, processed the first volume of oil lifted from the Santos Basin's pre-salt layer. It is a historical milestone for the global oil industry.

4. How did this history of overcoming challenges begin?

In 2004, a few wells were drilled to look for oil in the Santos Basin. Drilling was done because known sandy rocks were found there, deposited in deep waters above the salt level. If oil were discovered, the idea was to drill deeper until reaching the pre-salt, where technicians believed major oil reservoirs would be found.

In 2006, when drilling had already reached a depth of 7,600 meters from the water line, a giant gas accumulation and reservoirs of oil condensate, a component of light oil, were found. That same year, in another drilling done in the Santos Basin, the Company and its partners made another discovery that would change the course of exploitation in Brazil for good. The great news came at a depth of a little more than 5,000 meters from the water line: signs of oil were found under the salt layer in the well currently known as Tupi. This success lead to the drilling of seven more wells, and oil was found in all of them. The investment paid off.

5. What changes for Petrobras with these results?

These discoveries will catapult the company, in the upcoming years, to a new oil reserve and production level, ranking it among the major operators. With the experience they have acquired developing fields nestled in deep Campos Basin waters, Petrobras' technicians are prepared to develop the accumulations discovered in the pre-salt. To this end, they are already adapting the technology and the logistics the company developed through the years.

6. Does the industry have installed capacity to meet these demands?

This is another major challenge: the good and service industry's installed capacity cannot meet the foreseen demands yet. On account of this, Petrobras will resort to a few competitive advantages that have already been identified to drive the development of the supply chain. Thanks to its leveraging capacity, due to the volume of purchases, the company can sign long-term agreements with its suppliers. This is quite a guarantee for a market that is currently in expansion. Additionally, it can anticipate agreements, provide support to strategic suppliers, raise funds, and attract new partners. All of this based on an aggressive tendering program designed to face the production challenges of the near future.

7. What are Petrobras' trumps to operate in the pre-salt area?

Firstly, the undeniable, world-renowned competence of its technical and managerial staff; the experience accumulated in the development of the reservoirs found in deep and ultra-deep waters in the other Brazilian basins; its logistics base installed in Brazil; its capability to articulate with good and service suppliers and with the academic area contributing with knowledge; and the great economic and technological interest this challenge arouses in the country's scientific and industrial community.

Subsea 7 ready for next phase at troubled Brazil project -BG

The first of four giant riser systems that engineering group Subsea 7 is building for Brazilian offshore oil fields was ready to sail on Friday, energy firm BG said, a relief for Subsea 7 after big, costly delays to the project.

Subsea 7 warned last month it was suffering a series of issues at the $1 billion ultradeep Guará-Lula project, resulting in a cost blowout and a six-month delay in the offshore phase of the contract for the riser systems - subsea piping to carry oil.

"The first of the four buoyancy-supported risers was due to sail this morning," said Chris Finlayson, chief executive of BG, one of the partners in the Guara and Lula fields operated by Petrobras.

"It will then take around three weeks to tether that in place, at which point the steel catenary risers can start to be installed," Finlayson said.

Subsea 7 declined to comment.

It had predicted last month that the first of four riser systems would sail in mid-July, conditions permitting. The engineering company is assembling the systems in Brazil, where they are then loaded for transport offshore.

Vard falls into the red

Offshore shipbuilder Vard has reported a loss of NOK44m ($7.2m) in the second quarter 2013, down from a profit of NOK278m in the same period last year.


The first half earnings stood at NOK136m, a 75% drop on 2012's NOK548m. Cashflow has also tumbled in the first half from NOK1bn in 2012 to a negative NOK277m in 2013. Cash and cash equivalents have fallen to NOK2bn on 30 June this year, down from NOK3.3bn on the same date in 2012.

Second quarter revenues at Vard have fallen 11.7% year on year to NOK2.9bn, EBITDA was also down 73% to NOK121m for the quarter from NOK460m in Q2 2012.

While the second quarter saw the delivery of eight vessels, contracts were secured for just three, with no orders signed for the group's Brazilian and Vietnamese yards. The group's orderbook stands at 41 vessels as at 30 June 2013, with a total value of NOK13bn.

Vard's Brazilian yard, Vard Niterói, continues to suffer from high personnel turnover, delays, budget overruns and a dependency on outsourced hull construction. The company expects that the overload situation at the yard will be reduced from the fourth quarter of this year as a result of mitigating actions currently underway.

Vard Promar, the group's other Brazilian yard, has commenced operations on schedule, cutting its first steel in June 2013. Construction of the yard is expected to be completed in the third quarter of this year.

The problems in Brazil are isolated from the rest of the group, with Romania enjoying a high workload and Norway delivering several projects. Utilisation at Vietnam is suffering however, as the yard recently delivered the penultimate vessel in its orderbook.

Looking foward the company is upbeat about new contract potential for the second half of the year, expecting fewer orders for higher value vessels. A focus will be put on securing new orders for the Vietnam yard, as well as managing the high workload in Romania
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Suez Wins Water-Supply Contract for Oil Vessels Off Brazil Coast

Suez Environnement (SEV), the second-largest water company in Europe, won a supply contract for vessels involved in offshore oil production in Brazil.

Degremont, Suez’s water-management subsidiary, was awarded an engineering and procurement contract for four water-supply units for Keppel FELS Brasil and its affiliates Lindel Private Ltd. and Estaleiro BrasFELS Ltda.

The water-supply units, two of them seawater desalination, will equip two floating production, storage and offloading or FPSOs vessels ordered by Tupi BV, a subsidiary of state-owned Petrobras Brasileiro SA, for offshore oil production in Brazil. The other two are sulphate removal units that treat seawater to make it suitable for water injection, helping avoid clogging rock reservoirs and contributing to enhanced oil recovery, Suez said today in a statement. No contract terms were disclosed.

Following the discovery of ultra-deep reservoirs 300 kilometers off shore, Brazil will become the sixth-largest oil producer by 2020, said Remi Lantier, chief executive officer of Degremont. With the contract, “Degremont proves its capability to accompany Petrobras in its needs for innovative water solutions for upstream oil and gas production.”

Brazil –tender documents released for 1st pre-salt licensing round

On 9 July, the Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (ANP) of Brazil published the initial tender protocol and draft production sharing contract for its first licensing round for the vast pre-salt reserves in the country’s Santos basin, which will be auctioned on 21 October in Rio de Janeiro. This auction follows the success of the 11th licensing round of oil and gas rights in May and continues Brazil’s ambitious licensing programme, with an auction planned for unconventional oil and gas rights, including shale, in November, and another round for marginal fields planned for February 2014.

However, only the pre-salt round will award rights under production sharing agreements rather than concession contracts. The pre-salt area hit the headlines with the Lula (formerly Tupi) discovery in 2006. This 8 to 12 billion barrel field opened up a new petroleum province that is estimated to contain between 70 and 100 billion barrels in ultra deep water offshore Brazil.

This discovery provoked a national debate about how these reserves should be exploited, which resulted in the enactment in 2010 of a production sharing regime for pre-salt and strategic areas, as defined by the government, as an alternative to the concession regime which will continue to be used elsewhere. It also sparked a prolonged tussle between different states and municipalities regarding the distribution of production revenues. This regulatory uncertainty prevented any licensing from taking place between 2008 and 2013, but seems to have been resolved by new legislation allowing non-producing states a greater share in oil revenues. This has paved the way for the resumption of licensing and this first auction of pre-saltrights, which will cover an area known as “Libra” with estimated reserves of 12 bn barrels.

Access to such huge reserves will not come cheaply, with the Brazilian government demanding a signature bonus of 15 billion reais (£4.5 billion) from the winning consortium. By way of comparison, the total of the signature bonuses for the 142 blocks awarded in the 11th licensing round was 2.8 billion reais (£833 million). Even bidding is expensive, with each bidding company required to pay a participation fee of R$2,067,400 (£615,000), which will give them access to the relevant data packages.

Bidding

The tender protocol for the first licensing round sets out pre-qualification requirements, bid procedures and the main commercial terms of the production sharing contracts on offer, with pre-qualification documents to be submitted by 9 September 2013. Interested companies are required to pre-qualify and must provide evidence that they hold the requisite technical and financial capabilities. Pre-qualified companies may bid individually or in consortia of up to five members, with at least one member satisfying the highest levels of technical and financial criteria (“Level A”). The ANP has attempted to simplify the process for companies which have recently been through the licensing process, so that companies who qualified as Operator A or B for the 11th licensing round may request that the ANP refer to the documents previously submitted.

Petrobras, the state-controlled oil company, may decide to enter the auction individually or as part of a specific consortium established before the bidding takes place. In any case, it is a requirement of the pre-salt legislation that Petrobras becomes operator, and acquires a minimum 30% interest in any winning consortium. It will also be required to pay its relevant proportion of the signature bonus.

Production Sharing

Under a production sharing regime, private companies bear exploration and development risks and only recover their costs if they make and develop commercial discoveries. When production commences, those companies are reimbursed for expenditures from a percentage of the revenue generated by oil sales (cost oil). For this round, the cost oil percentage is subject to a maximum of 50% of the total production value for the first two years and 30% for all years thereafter.

The remainder of the production (profit oil) is then divided between the private companies and the state. Under the Brazilian production sharing agreement the split of profit oil will vary according to (1) the price per barrel and (2) the average daily production per well, subject to a minimum government share of 41.65%. Wells suffering from technical and operational issues that cause them to fall below the average will not be included in the calculation. For the purpose of bidding, companies will indicate the percentage of profit oil they are offering on the basis of an oil price of US$100.01 to US$120 per barrel and an average daily production of between 10,001 bpd and 12,000 bpd. The winning bidder will be the one which offers the greatest percentage of profit oil to the government. In the event of a tie, the joint highest bidders will be invited to submit a further bid. If they are still tied, the winner will be selected at random.

The production sharing agreement will have a term of 35 years, with an exploration phase of four years and a development and production stage of up to 31 years. Bidders are required to source at least 37% of goods and services in Libra’s exploration from local sources (known as “local content”), with that figure rising to 55% during the production phase. Local content commitments have been a feature of every licensing round since the seventh round in 2006 and have been one of the criteria for determining the winning bids. For the pre-salt auction the local content percentages are fixed and not a bidding criteria, although the required percentages are broadly in line with those levels bid for offshore acreage in the last licensing round. This is important to bidders because prices for most oil and gas supplies manufactured in Brazil remain considerably higher than the equivalent produced internationally.

The announcement of this round has been anticipated for some time and a number of details have been released over recent weeks. The auction of the pre-salt rights is expected to prove prohibitively expensive for smaller companies but should attract the sector’s major players, including a number of Asian national oil companies, which are likely to be comfortable with a non-operator role alongside Petrobras, and many of which qualified for the 11th round with Operator A status but chose not to bid in that round. In any case, the acreage on offer is considered highly attractive and the bid round is expected to be competitive. New pre-salt bidding should also trigger an acceleration in oil and gas investment in this important region, and, in the medium term, help Brazil to sustain strong production growth.

SBM announces FPSOs contracts

SBM announces FPSOs contracts with a consortium comprised of Petrobras (65%), BG Brasil - BG Group (25%), and Petrogal - Galp (10%). of Lula field.


SBM Offshore announced today (15 July) that contracts have been executed with BM-S-11 subsidiary Tupi BV on 12 July 2013 for the twenty-year charter and operation of the two (2) FPSOs Cidade de Maricà andCidade de Saquarema.

Both FPSOs are destined for the Lula field in the pre-salt province offshore Brazil. BM-S-11 block is under concession to a consortium comprised of Petrobras (65%), BG Brasil - BG Group (25%), and Petrogal - Galp (10%).

The FPSOs will be owned and operated by a Joint Venture owned by affiliated companies of SBM Offshore, Mitsubishi Corporation, Nippon Yusen Kabushiki Kaisha, and Queiroz Galvão Óleo e Gás S.A. in which SBM Offshore shareholding will be 56%.

SBM Offshore is in charge of the construction. The two FPSOs will be direct copies of the blueprint for FPSOCidade de Ilhabela, which is scheduled to launch next year. In addition, Cidade de Maricà and Cidade de Saquarema will also benefit from the technological expertise and experience that the Company acquired during the successful completion of FPSO Cidade de Paraty - the first of four state-of-the-art, pre-salt FPSOs to start production offshore Brazil.

Planned delivery for FPSOs Cidade de Maricà and Cidade de Saquarema is expected respectively by end 2015 and early 2016.

The total Contract Value for which the Joint Venture company owned by SBM Offshore and its partners will acquire the two FPSOs is approximately US$ 3.5 Billion.

Technip to provide flexible pipes for Iracema Sul field in Brazil

France-based engineering and construction firm Technip has secured a contract from Petrobras to deliver flexible pipes for the development of Iracema Sul field, which is situated in the Santos Basin pre-salt area, Brazil, at a water depth of up to 2,500m.

The value of the contract is estimated to be around EUR500m.

Under the contract, Technip will supply almost 250km of flexible pipes for oil production, gas lift, water and gas injection, as well as related equipment for the pre-salt area to be installed on the floating production storage and offloading unit Cidade de Mangaratiba.

The highly technological flexible pipes have been designed to meet Petrobras' requested service life. Gas injection pipes are designed for high internal pressure, using the Teta profile developed by Technip's R&D team.

Technip's operating center in Brazil will execute the engineering and project management.

The flexible pipes will be fabricated at the company's existing manufacturing plant in Vitória, while some specifications also being produced at the new manufacturing plant at Açu, Brazil.

Technip is expected to carry out first delivery in the first half of 2014.

Brazil to require shale probes as part of onshore gas licensing round

Brazil will require oil and gas companies to test the shale gas potential at a number of onshore exploration blocks that it is offering as part of its 12th licensing round, the country's energy regulator said Tuesday.

Brazil's 12th Bidding Round at the end of October will offer onshore sedimentary basins of Parana, Parecis, Parnaiba, Reconcavo, Acre and Sao Francisco, which Brazil's National Agency of Petroleum, Natural Gas and Biofuels (ANP) believes hold significant reserves of both conventional and unconventional gas.

While the focus of exploration will likely be for conventional gas deposits, the government is keen to start evaluating the shale gas potential of the blocks, ANP head Magda Chambriard said.


Winning bidders in the round will be required to drill into shale source rocks in some of the basins as part of work commitments on the acreage Chambriard said. The well results must then be submitted to ANP for review.

"If the analysis is good then they can go ahead and develop the shale, if it's not, we will [at least] have good information of the shale potential," Chambriard told reporters in London.

Brazil, which produces more than 80% of its power from hydroelectric dams, is looking to generate more from gas-fired plants to avoid outages during droughts and to produce more gas domestically to cut its dependency on imports of LNG.

The final list of blocks for the 12th round has yet to be announced, but more 250 blocks will be offered, covering an area of 168,348 sq km, according to local reports.

Brazil has surveyed several prospective shale basins, with four included in the 12th round -- Parnaiba, Parecis, Reconcavo and Sao Francisco -- expected to hold a combined 288 Tcf of potential shale gas, Chambriard told an investor briefing in London.

The US Energy Information Administration has also estimated that Brazil's Parana basin holds a further 226 Tcf of technically recoverable reserves.

Chambriard said the estimates represent only preliminary figures based on an analogue model of rocks found in the US's prolific Barnet Shale play.

Aker win Brazil contracts

Offshore staff

FORNEBU, Norway – Repsol Sinopec Brazil has contracted Managed Pressure Operations (MPO) to provide managed pressure drilling (MPD) systems and riser gas handling services.

The three-year contract, with options for a further two years, involves use of the equipment for an ultra-deepwater operation in the Campos basin offshore Brazil.

Charles Orbell, head of MPO, which is part of Aker Solutions' drilling technologies business, said the program would “demonstrate the unique capabilities of our riser gas handling safety system and introduce the first deepwater application of our riser drilling device into an offshore MPD system below the tensioner on a rig".

The riser gas handling system helps control wellbore fluids during offshore oil and gas drilling. It detects an influx of gas into a drilling riser and diverts the gas to prevent a blowout.

The riser drilling device seals the area around the drill pipe during drilling operations. Integrating a riser drilling device with a riser gas handling system enables MPD drilling operations