Friday, December 2, 2022

Pricey FPSOs startle Petrobras as it pursues production ramp-up

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IHS Markit said Brazil’s Petrobras has been making orders for floating production, storage, and offloading (FPSO) vessels at price tags spiked by supply chain disruptions.

As Brazil targets an aggressive production ramp-up, it will continue to be faced with higher prices for FPSOs as IHS Markit says this is the new normal.

Petrobras ordered a US$2.3 billion P-79 FPSO in June last year, which will be delivered through an engineering, procurement, and construction (EPC) contract by Saipem and South Korea’s DSME. IHS said it marks the return of Petrobras to owning and operating its floaters after a long time of only hiring in lease contracts. The vessel is designed to process 180,000 barrels per day (b/d) of oil and 7.2 million cubic metres of gas per day.

IHS noted orders by Petrobras in June of this year, of the P-80 and P-82 FPSOs from Keppel at US$2.98 billion each. Keppel beat out Sembcorp Marine Rigs & Floaters’ offer of US$3.66 billion and US$3.73 billion respectively. These vessels, each with capacity of 225,000 b/d of oil and 12 million cubic meters per day of gas, are scheduled for first oil in 2026 in the Santos Basin.

But the highest price tag on a bid came from the Brazilian contractor Ocyan for the FPSO to Sergipe Aguas Profundas (with 120,000 b/d of oil processing and 8 million cubic metres per day for gas exporting), in a Build-Operate-Transfer model. IHS said the contractor proposed a US$4 billion price tag for the EPC of the unit and four years of operation, with conditions pointing to the war between Russia and Ukraine. Petrobras, according to IHS, cancelled the tender in May this year, surprised by the price and conditions.

They decided to review the bidding model to understand why so few offers were received of late, with prices so high.

IHS pointed out that the two main leasing companies – SBM Offshore and MODEC – have a full backlog of orders for upcoming years, with contract prices increasing significantly. Brazil and Guyana are some of the main producers racking up order books for FPSO builders. A Petrobras strategic plan envisions a total of 15 FPSOs between 2022 and 2026 offshore Brazil. ExxonMobil envisions ten FPSOs offshore Guyana by the end of the decade.

In addition to the leasing companies being busy, IHS said many shipyards are running close to capacity.

“Capacity, although much tighter now, is still available to Petrobras, but at the right price,” IHS stated.

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