Petrobras working to make FPSO tenders more attractive

Brazilian oil giant Petrobras is working with the market to increase the competitiveness and attractiveness of FPSO contracting processes, the company told BNamericas through its press office. 

The state-run firm is currently the main contractor for FPSOs in the world, with 14 units scheduled to come into operation by 2028. Between 2029 and 2032, another seven FPSOs could be installed. 

One of the main obstacles is financing increasingly large units at a time when many financial agents are turning their attention to the renewable energy market. 

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

“For FPSOs that use the charter contracting model, the supplier market has experienced some financing difficulties. In the case of owned FPSOs, we’ve been working with the supplier market to find a balance in the cash flow,” Petrobras said. 

The owned FPSOs – whose names always start with P, such as P-78 – are generally contracted using the EPC (engineering, procurement and construction) model, but the federal oil giant also considers the BOT (build-operate-transfer) model for certain tenders.

Petrobras said it has revised the flow of payments and guarantees and has obtained approval for the prioritization of financing from Brazil’s merchant marine fund (FMM) for the SEAP FPSOs to the tune of 8.56bn reais (US$1.5bn).

The company also clarified that, for chartered FPSOs, it requires a bank guarantee, guaranteed insurance and a first-degree mortgage after the start of operations, while, for its owned units, it requires a bank guarantee, guaranteed insurance and a parent company guarantee (PCG).

According to Daniela Davila, from law firm Vieira Rezende Advogados, oil companies such as Petrobras and Shell have understood that it is necessary to raise funds through advanced charter payments.

However, there are limits to this type of operation, which can become a problem from a tax point of view.  

“The oil company can only pay as a charter or lease up to a certain percentage of the total value of the asset. Otherwise, the deal could be considered a disguised sale and purchase,” the lawyer told BNamericas.

Because it is a mixed-capital company, Petrobras cannot give a guarantee to the FPSO financiers, unlike private sector oil firms.

In recent Petrobras tenders, there was no agreement on the coordination of guarantees, since the creditors wanted a first-degree mortgage, just as Petrobras wanted in return for the advances.

“Petrobras even submitted a draft inter-creditor agreement to [its procurement website] Petronect, but the terms were not acceptable to the international banks,” said Davila.  

Gabriela Fischer, from law firm Trench Rossi Watanabe, said the problem of financing is not unique to Brazil. 

“This is a global issue, there’s a lot of pressure regarding ESG [issues], but the market will rearrange itself somehow. Energy security is a greater good, and this became very evident with the war in Ukraine,” she told BNamericas. 

Her colleague, Danielle Valois, believes that banks will not stop financing projects involving fossil fuels. 

“The oil industry is mature, the risks are well mapped out and its profit margin is above average,” she said.