Petrobras, FPSO operators eyeing BOT contracting model

Petrobras is carrying out studies to evaluate the use of the BOT (build-operate-transfer) model in future FPSO contracts, the Brazilian company told BNamericas through its press office. 

The strategy could run up against potential restrictions imposed by the federal court of auditors (TCU), affecting the attractiveness of new tenders – a particular concern for Petrobras amid market difficulties in obtaining financing for increasingly large platforms. 

Under the BOT model, the contracted firm is responsible for building the FPSO and operating it for an average of three to five years. Then, the oil company takes over the production unit. The model essentially falls between engineering, procurement and construction (EPC) and charter contracts. In the first case, the oil company assumes all the risks of building and operating the platform it owns. In the second case, these tasks are carried out by a contracted firm that owns the FPSO.

Recent tenders carried out by Petrobras, such as those involving the Sergipe Águas Profundas (SEAP), Albacora and Barracuda/ Caratinga FPSOs, have attracted few bidders due to the scarcity of financing and contractual requirements established by the company related to financial guarantees and local content. 

In 2021, Petrobras launched tenders using the BOT model to contract the two SEAP platforms, but the proposal submitted by the Brazilian group Ocyan was invalidated by Petrobras. 

An audit by the TCU of the process found evidence of favoritism towards Ocyan in SEAP 1 due to the choice of the BOT model over EPC and chartering, as only two companies (China’s CNOOC and Ocyan) had BOT as their first option and no restrictions on the model.

In its report, the TCU pointed out that in the case of BOT, more than 90% of the resources needed to build the FPSO are paid for by Petrobras. “Therefore, the choice of BOT met Ocyan's financing constraints,” said the federal agency. 

Petrobras told BNamericas that the contracting process for the SEAP 1 FPSO project using the BOT model was discarded because no valid bids were received.

Ocyan said that it had not been formally notified of the TCU report. 

"The company participated in the bidding process without knowledge of the other bidders, of Petrobras' internal procedures, and in the manner provided by law. The bid was submitted and it was Petrobras' decision to cancel the bidding process without awarding a contract." 

After that, Petrobras launched new tenders for SEAP, this time under the charter model, but the only bidder – the unknown IFM Construções e Montagens Industriais – had its proposal disqualified. 

The federal oil giant said it is carrying out internal evaluations to define the return to the market to contract the SEAP FPSOs, which have been approved for priority financing of 8.5bn reais (US$1.5bn) by Brazil's merchant marine fund. 

In an interview with Agência Eixos earlier this week, Petrobras' director of exploration and production, Sylvia Anjos, said that the start of production of the units, which will each have the capacity for 120,000b/d of oil and the export of up to 9Mm3/d of natural gas, could be after 2028, which is the year foreseen in its current business plan. 

“It's our priority: 2028. You see, we're on 2024, so it's a challenge. I don't think we can achieve 2028, it depends, we're trying to make some small adjustments so that we can speed up construction (...) If it's not 2028, it'll be 2029. We'll be betting on price and faster time,” said the executive. 

The main operators of FPSOs in Brazil are the Dutch company SBM and the Japanese company Modec. In both cases, contracts have historically been signed under the charter model. 

However, the companies have come out in favor of BOT in order to take part in Petrobras' tenders again due to the expectations of the energy transition and the demands made by the state-owned company. 

“If Petrobras has BOT projects, we'll be interested. Today, Brazil accounts for approximately half of our business, and we want it to stay that way. So, without a doubt, if the model changes, we’ll participate [in the tenders],” SBM's global business director, Olivier Lcyk, told Broadcast Estadão last week. 

In August, Ocyan CEO Jorge Mitidieri told BNamericas that the company intends to participate in the new Albacora process if it comes under the BOT model. The previous tender was canceled after Petrobras failed to reach an agreement with Ocyan on the contract price. 

OVERVIEW

Petrobras' 2024-2028 business plan foresees the start-up of 13 FPSOs in the period. 

The company is currently holding a tender to charter the Barracuda and Caratinga FPSO, in which India's Shapoorji Pallonji Energy Private Limited was the only bidder. 

A source close to the matter told BNamericas that the Barracuda tender is unlikely to succeed since Shapoorji's price is way above Petrobras’ planned budget.

In addition to new tenders for SEAP and Albacora, the oil company should soon launch the contracting process for the Marlim Sul/Leste FPSO, which is scheduled to produce its first oil between 2029 and 2032, along with six other FPSOs.