Petrobras analyzing new FPSO contracting strategy

Brazil’s federal oil company Petrobras is considering a new variation for its build, operate, transfer (BOT) FPSO contracting model to enhance the attractiveness of its projects and maximize results.

The company is studying the BOT-FEED option, including the front end engineering design stage in the contract, a spokesperson told BNamericas. 

Under the BOT model, the charterer builds and operates the FPSO for three, four, or five years and then hands the unit to the field operator. The BOT model contains elements of the engineering, procurement and construction (EPC) and the chartering contracts models, which Petrobras uses extensively.

The BOT-FEED model, in turn, contains elements of EPC and the BOT models. 

Petrobras recently closed EPC contracts for its new Búzios field production units P-78 and P-79, is tendering the P-80 acquisition using the same mode, and the Sergipe-Alagoas deepwater FPSO via BOT. 

The resumption of contracting owned platforms comes after Petrobras hired several FPSOs under the chartering model, mostly with Modec and SBM Offshore, besides new market entrants such as Yinson and Misc. 

One reason for the change is the need to reduce exposure to FPSO operators, mainly SBM and Modec, which are already busy with orders.

“The definition of the contracting model for each project is based on economic analysis, considering aspects such as finance ability, supplier market conditions, technical specifications of the project, execution time and operational efficiency,” the spokesperson said. 

“We understand that it is necessary to have a balanced use of the different contracting models available, according to the market situation and the behavior of the variables that directly impact the economic viability of the projects over time,” according to the spokesperson, who added that the chartering model remains an option. 

Requesting anonymity, an executive of an FPSO operator in Brazil told BNamericas that the industry is experiencing a phase of financing difficulty and scarce availability of shipyard infrastructure. 

“There are more projects than money to fund and places to make. Field owners haven't realized it yet, but getting a company to guarantee you project and infrastructure available for your future undertakings will have a big advantage,” the source said. 

The P-78 and P-79 tenders included the possibility that the winners built more than one production unit since they offered a discount. With that, besides the savings, Petrobras would assure shipyard infrastructure for more orders. However, no bidder made such a proposal.

Petrobras is replicating the approach in the P-80 tender, which may award two additional FPSOs. 

Daniela Ribeiro Davila, of Vieira Rezende law firm, said the EPC and BOT models allow the field operator to pay for construction. 

“It ends up being a cheaper model that aims precisely at the entry of new players. Of course there is a counterpart, which is the transfer of the asset to Petrobras,” she told BNamericas. 

Davila said the chartering model is not the most suitable for Brazil, since the country’s locations require tailored FPSOs.   

“It is not easy to take any FPSO and/or adapt the hull and apply plug and play. These [EPC and BOT] models came to reward the construction part, and that is what will enable the development of pre-salt assets, which have a number of particularities,” she said.  

FPSO construction financing comes often through European and Asian banks, which are familiar with the shipyard in the region and know how to price the operation via leasing systems, for example. 

In September, SBM Offshore completed the project financing of FPSO Sepetiba for US$1.6bn, the largest such transaction in the company’s history. The operation was secured by a consortium of 13 international banks with insurance cover from export credit agencies Nippon Export and Investment Insurance (NEXI), from Japan, and Italy's SACE.

A letter of intent was received from Chinese export and credit insurance company Sinosure, which intends to join this transaction by year-end and will replace a portion of the commercial banks’ commitments.

“The main alternatives for FPSO financing are outside Brazil. It's usually a basket of currencies, with a syndicate of banks involved,” Oscar Malvessi, a corporate financing consultant, told BNamericas.