Petrobras Forced to Suspend Libra Floater Job
Friday 20 January 2017
A quartet of floater specialists was left on tenterhooks this week when a Brazilian court suspended a Petrobras tender for a floating production, storage and offloading vessel to serve the giant Libra pre-salt development in the Santos basin.
The Libra tender had already been subjected to a string of minor delays, but these were self-imposed by the Petrobras-led consortium.
Modec International, BW Offshore, Bluewater and SBM Offshore are the main contenders.
However, SBM could yet be barred from bidding unless a long-delayed anti-corruption settlement is signed and sanctioned by Brazil’s public prosecution service and Ministry for Transparency.
The proposed settlement takes account of past non-compliant practices involving SBM agents and staff in Brazil, and sets out the framework for future compliance commitments.
However, the financial aspects of the settlement were rejected by the public prosecution service’s supervisory council, necessitating new negotiations.
Petrobras director for governance and compliance Joao Elek was recently candid in his assessment of the issue, telling reporters the prosecution service’s decision to reject the terms of the settlement by excluding such a key player from the tender process would be “detrimental” to the oil company’s plans by limiting competition.
The latest delay, by just two weeks to 31 January, was interpreted by some industry insiders as signalling that an agreement was getting close.
A new obstacle emerged this week, however, when Brazilian shipbuilding association Sinaval obtained a court injunction to block the Libra tender.
Sinaval’s grounds included the argument that Petrobras could not continue with the tender while simultaneously seeking a waiver for non-compliance with local content rules.
The waiver request is still under evaluation by Brazil’s hydrocarbons regulator (ANP).
Sinaval also objected that the invitation to tender on Libra had been sent only to international contractors chasing the FPSO contract.
Joining the ANP and state-run pre-salt entity PPSA as co-defendants, Sinaval also claimed the oil industry was not properly consulted about the claim that a waiver from local content was a commercial necessity.
Granting the injunction, judge Neviton Guedes overruled a previous decision by judge Francisco Ribeiro.
In that earlier decision, Ribeiro said there is no clause in the Libra production-sharing contract that forces Petrobras to wait on the ANP decision on the waiver to adjust local content.
“In case the ANP verifies that reductions in local content are not justifiable, it will take the necessary measures by applying fines,” the judge wrote.
In accepting this procedural point, the ANP observed that sticking to contractual local content would push dayrates 40% higher than normal prices practised in the international market. Sources suggested that the injunction would logically be overturned again.
“Nobody is going to say this up front, but Petrobras has been delaying bidding to leave open a window for SBM Offshore to participate. Assuming this injunction is overturned fairly promptly, some moderate delay may not be such a bad thing ” said one source with the Libra consortium.
SBM has invested in building up its own local capacity, including the Brasa topside integration yard. Petrobras first launched the Libra FPSO tender in August 2015, but under terms that saw Modec emerge as the sole bidder.
Sources suggested dayrates for Libra came close to $1 million.
A rebid saw local content slashed to 25% from 80%, with criteria greatly simplified, stoking up stronger interest among potential bidders.
Petrobras has also postponed again the date to welcome bids for another FPSO, a large unit to be deployed at the Sepia pre-salt field, with proposals now due in 2 March.
Malaysian contractor Bumi Armada was seen as an outsider to joint the established quartet in the hunt for the Sepia prize.
Each floater will have capacity to produce 180,000 barrels per day of oil, with Sepia processing 5 million cubic metres per day of natural gas, while Libra will feature topsides modules for 12 MMcmd.
Both units are earmarked to enter operations in late 2020.
Petrobras exploration and production director Solange Guedes said recently that the commercial viability of Libra would be threatened if a local content waiver was not granted. However she said discussions with the ANP were proceeding well.
“Given the substance and volume of the information that we have put at the agency’s disposal, the Libra consortium believes that this issue is moving forward positively,” she said.
Petrobras has also sought a waiver from local content on Sepia.