Kommandor 3000. Via Subsea7

Subsea 7 S.A. (SUBC.OS) has just announced the award of a 5-year contract worth over $350 million from Petrobras for the operation of the Pipe Lay Support Vessel (PLSV) Kommandor 3000.

Subsea 7 says the work scope is similar to the current contract, including project management, engineering and the installation of Petrobras supplied flexible lines and equipment on a day rate basis.

Kommandor 3000 is a construction/flexlay vessel with a purpose-built pipelay system to install flexible lines, umbilicals and equipment in up to 2,000 m water depth and with a top tension capacity of 150t.

Kommandor 3000 will start operations under the contract in 2013.

Drill ship from another project similar to the ships being built for Petrobras. Image courtesy of LMG Marin.

Global power systems company Rolls-Royce said Thursday that it has won an order worth more than 100 million pounds to supply integrated power and propulsion systems for seven Petrobas drillships to be built at the Atlântico Sul shipyard in Brazil.

Rolls-Royce says that it will abide by Brazil’s strict “local content” requirements and equip each of the seven newbuilds with six large thrusters and six Bergen diesel generator sets.

Tony Wood, Rolls-Royce, President – Marine commented: “We are delighted to announce this significant order in Brazil for our new customer, Atlântico Sul. This contract builds further on our strong reputation for innovation and technology, and on our market-leading position for power and propulsion systems in the offshore drilling sector.”

Estaleiro Atlântico Sul, along with its partner Sete Brazil S.A., outbid other Brazilian shipyards and won the contract to build the ships from Petrobas in 2011 for US$4.6 billion.

Mr Otoniel Silva Reis, CEO, Atlântico Sul, said: “We look forward to working with Rolls-Royce on this project. Their vast experience and expertise in providing highly innovative and reliable power and propulsion solutions, particularly in the mobile drilling sector, is a tremendous asset as we build these highly advanced drill ships for Petrobras.”

Rolls-Royce has facilities in Sao Bernardo do Campo, Rio de Janeiro, Niteroi and Macae. The company is also expected to open a new facility in 2013 in Santa Cruz, Rio de Janeiro, which will be dedicated to the assembly and testing of RB211 industrial gas turbines. Rolls-Royce says that the first batch of equipment to be produced in Santa Cruz has already been ordered by Petrobras in a US$650-million contract signed in 2011.

The seven drillships are expected to be delivered in 2015  and will primarily support extraction from wells along the pre-salt layer, located 2,000-3,000 metres below the surface of the Atlantic Ocean, offshore Brazil.

Transpetro, as Petrobras’s logistics unit is also known, suspended in May orders with EAS to build 16 vessels after the shipyard delivered the first tanker nearly two years late. Now that EAS has fulfilled conditions put in place to restore the contracts, work to build four of the 16 ships can move forward although contracts covering the 12 remaining vessels remain suspended, Transpetro said.

The troubles at EAS underscore the issues Brazil has encountered in restarting its long-dormant shipbuilding industry, once among the world’s largest before falling into decline in the 1990s. The renaissance is encountering growing pains as old shipyards are restored and new ones are carved out of the country’s rugged coastline.

Brazil wants local firms to supply Petrobras with the drilling rigs, production platforms and other ships needed to develop recently discovered offshore oil fields. The country is using requirements for a high percentage of locally produced goods and services, or local content, in development of the newfound oil resources as a way to spark growth in the country’s industrial sector and a fledgling oil and natural gas services industry.

Earlier this year, Transpetro demanded that EAS find a technical partner for the shipyard after South Korea’s Samsung Heavy Industries Co. (010140.SE) sold its 6% stake in EAS. EAS reached a deal in June with IHI Marine United, a unit of Japan’s Ishikawajima-Harima Heavy Industries, to serve as technical consultant at the shipyard.

The four ships Transpetro approved Friday, however, will be built using Samsung technology, Transpetro said.

EAS is controlled by local construction conglomerates Camargo Correa and Queiroz Galvao.

-By Jeff Fick. (c) 2012 Dow Jones & Company, Inc.

Image (c) Shutterstock

General Electric Co. (GE) and Brazilian energy company Petroleo Brasileiro (PBR, PETR4.BR) have signed the world’s largest subsea wellhead production contract, worth nearly $1.1 billion, as GE looks to boost development of the oil and gas sector in Brazil.

The contract, which builds upon an existing partnerships between the two companies, includes the delivery of about 380 subsea wellhead systems and installation tools needed in oil well exploration. More than 75% of the parts will be made in Brazil.

GE Oil & Gas is expanding its operations in Brazil to meet growing demand for oil field equipment and services, especially from state-run energy giant Petrobras. In 2009, the companies signed what was then the biggest contract in history to date, in terms of number of wellheads, worth $250 million. In June, GE said it had completed a $32 million expansion of its service and subsea systems facilities in Macae, Brazil, the primary base of operations for offshore oil production in the country’s Campos Basin.

“In recent years our investments and efforts have been focused on preparing our company to support market growth and to be ready for contracts of this size, developing the entire supply chain,” said Joao Geraldo Ferreira, CEO of GE Oil & Gas for Latin America. “We want to grow with the country.”

Petrobras plans to install the subsea wellhead systems in oil and gas fields in Brazil. The equipment will be produced at the GE plant in Jandira, where GE has invested $30 million to expand production capacity.

In July, General Electric said it remained on track for double-digit earnings growth this year despite reporting an 18% drop in second-quarter profit. The bellwether U.S. conglomerate is continuing the restructuring of its finance and industrial arms, and will split its energy infrastructure business into three standalone operations.

GE shares were up by 11 cents, to $22.16 in recent trading, while Petrobras’ American depositary shares were up by 10 cents, to $29.95. GE’s stock is up 12% over the past three months, while Petrobras’ stock is up 26% over the same time period.

-By Nathalie Tadena. (c) 2012 Dow Jones & Company, Inc.

The BW Pioneer FPSO is anchored in over 8,000 feet of water at Petrobas’ Cascade field and is the first FPSO to produce oil and gas in the U.S. Gulf of Mexico. Photo: Petrobas USA

Brazilian state-owned oil company Petroleo Brasileiro SA, or Petrobras, is seeking a joint-venture partner to invest as much as $4 billion into the company’s deepwater drilling operations in the U.S. Gulf of Mexico, people familiar with the matter said.

Petrobras has hired Morgan Stanley to seek out potential partners for the assets, which the seller pegs at roughly $8 billion, the people said. The bank has begun sending out initial financial information to prospective buyers, including foreign and U.S. oil companies, they added.

Petrobras is looking to sell as much as 50% of its Gulf operations in a deal that would allow it to maintain control, the people said.

The asset sales are part of a previously announced plan by the Brazilian oil giant to raise nearly $15 billion to fund its five-year investment plan. Petrobras has looked to scale back its investment in the U.S. and in other overseas operations by selling assets including oil drilling blocks in the Gulf of Mexico and Brazil. In July, the company said it has increased its goal for raising revenues from asset sales to $14.8 billion, up from $13.6 billion previously, and reiterated that the sales will focus on overseas assets.

The company has provided few details on which assets it plans to sell.

Petrobras, which in Brazil unlocked one of the world’s most promising offshore oil provinces, delved deep into the Gulf of Mexico’s most challenging new region, the so-called Lower Tertiary. It found oil there in 2002.

Its Cascade-Chinook development began producing oil in February. It is being closely watched by the industry, as it’s the first to pump crude from Lower Tertiary rocks in the far-off Walker Ridge area of the Gulf, which is thick with projects by rivals Chevron Corp. and others. The fields are located about 160 miles south of Louisiana in waters more than 8,000 feet deep.

Production at the Cascade well has been ramping up quickly to 174,554 total barrels of oil in June, up from 85,348 barrels in March. Petrobras owns 100% of Cascade and 66.67% of Chinook, in partnership with France’s Total S.A. The Cascade-Chinook development was also the first in the U.S. Gulf of Mexico to pump offshore oil using a floating, production, storage and offloading vessel instead of a traditional oil platform. The so-called FPSO vessels can be easily placed in far off areas and don’t need pipelines to operate. Also, unlike pipelines, these vessels can be moved in the event of dangerous storms.

American depository shares of Petrobras closed up 3.2%, or 69 cents, at $22.13 on Friday. The stock is down 11.5% on the year.

-By Sharon Terlep, Anupreeta Das and Angel Gonzalez. (c) 2012 Dow Jones & Company, Inc.

The VLCC enters dry dock where it will be converted to the P-74 FPSO. Image: AGÊNCIA PETROBRAS / LUÍS RIEDLINGER

RIO DE JANEIRO–Brazilian state energy company Petroleo Brasileiro S/A (PBR, PETR4.BR), or Petrobras, said Tuesday that it had started work to convert an oil tanker into the first floating production platform to be installed at an offshore oil field transferred to the company by the government.

The Very Large Crude Carrier will be converted into the P-74 floating production, storage and offloading vessel, or FPSO, Petrobras said. The ship was moved into a dock at the recently refurbished Estaleiro Inhauma on Monday, the company said.

The tanker conversion will be the first of its type to be carried out in Brazil as local shipbuilders ramp up operations to meet demand for tankers, support vessels, drilling rigs and production platforms. Inhauma, which in the 1980s was the world’s second-largest shipyard, is part of a rebirth of Brazil’s shipbuilding industry driven by development of recently discovered oil fields off Brazil’s Atlantic coast.

The transfer-rights area is an important part of Petrobras’s development of the Santos Basin presalt region, a cluster of oil discoveries made under a thick layer of salt more than four miles below the ocean’s surface. As part of the company’s 2010 share offer and capitalization, the government gave Petrobras the right to produce up to 5 billion barrels of crude oil from highly prospective areas close to the original presalt finds.

The P-74 is the first of four FPSOs that will be built at Inhauma specifically for the transfer-rights area, Petrobras said. The conversion is expected to be completed by June 2014. A consortium formed by local construction firms Norberto Odebrecht, OAS Ltda., UTC Engenharia SA and technical partner Kawasaki Heavy Industries Ltd. (KWHIY, 7012.TO) will handle the $1.7 billion job to convert the tanker and subsequent conversions for the P-75, P-76 and P-77 FPSOs.

Image via Shutterstock

RIO DE JANEIRO–Brazilian shipbuilder and oil-field services company OSX Brasil SA (OSXB3.BR), part of Brazilian businessman Eike Batista’s industrial empire, said Tuesday it had signed a contract with a group including federal company Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras, to finish work on two floating platforms.

The contract was expected after OSX executives had said in a July 27 conference call that the deal would be signed in the first week of August. Petrobras had announced in late July that OSX and consortium partner Mendes Junior had won bidding to install topside processing equipment on two floating production, storage and offloading, or FPSO, vessels.

OSX has widened its reach this year as it positions itself as a player in Brazil’s naval construction and offshore oil services industry, building on the company’s first contracts with sister company OGX Petroleo e Gas Participacoes S/A (OGXP3.BR, OGXPY). OSX has also signed deals to build tankers for Kingfish do Brasil Navegacao S/A and is in talks to build drilling rigs that will be leased to Petrobras.

OSX and partner Mendes Junior, a local engineering firm, will install processing equipment on the decks of the P-67 and P-70 FPSO’s, integrating the equipment with the converted oil tanker. Petrobras, BG Group (BG.LN) and Portugal’s Galp Energia (GALP.LB) will use the FPSOs to produce oil from ultra-deepwater oil fields known as the pre-salt, a cluster of oil discoveries made more than four miles deep off Brazil’s southeast coast.

OSX shares were down 1.9% at 12.49 Brazilian reais ($6.18) on the Sao Paulo Stock Exchange as of 1705 GMT. The shares underperformed the broader market as measured by the Ibovespa stocks index, which was fractionally higher at 59,139 points.

(c) 2012 Dow Jones & Company, Inc.

The MT João Cândido, the first in a series of ten 160, 000 dwt Suezmax tankers for Transpetro, under construction at Atlântico Sul Shipyard. In March, the ship had to return to the yard after experiencing problems with listing and welds, a major problem considering its delivery to Transpetro was already behind schedule. Photo: Petrobas

(Bloomberg) — OSX Brasil SA, the shipbuilder controlled by Brazil’s richest man, stands to benefit from a rival’s failure to deliver vessels on time for offshore oil production. So do the company’s plunging shares.

Eike Batista’s OSX is among companies vying to sell oil tankers and other ships to Petroleo Brasileiro SA as Brazil’s state-owned oil company seeks to more than double output of crude by 2020. Until now, OSX has principally supplied Batista’s own production company, OGX Petroleo & Gas Participacoes SA.

Petrobras, as the oil company is known, in April suspended a 16-tanker contract with Estaleiro Atlantico Sul SA, which delivered its first ship 21 months late and lost its construction technology partner in March. That opens the field for OSX, said Luiz Broad, an analyst at Agora Corretora.

A major vessel contract with Petrobras “would be very positive,” Broad said in a telephone interview from Rio de Janeiro. “It would have immediate effect on the shares.”

OSX shares have dropped 68 percent since their March 22, 2010 initial public offering, compared with a 22 percent decline for the benchmark Bovespa Index. The shares have suffered from the production company’s failure to meet its own forecasts on timetables and levels of oil production.

The OSX shipyard is under construction in Sao Joao da Barra in northern Rio de Janeiro state and will be the biggest in the Americas, according to the company’s business plan. It is scheduled to launch its first domestically built Floating, Production, Storage and Offloading vessel, or FPSO, in 2014. Last year OSX delivered to OGX a vessel of the same type built in South Korea, and two others are under construction in Singapore.

Local Content

Under former President Luiz Inacio Lula da Silva, the Brazilian government created rules that require oil producers to acquire locally made equipment in an attempt to develop industries ranging from shipyards to oil service providers. Batista created OSX in 2009 to profit from the rules while also supplying OGX, his oil company.

OSX, based in Rio de Janeiro, is in talks to become a supplier of drilling rigs and support vessels for Petrobras, Luiz Carneiro said in May, before he moved from being chief executive officer of OSX to the same post at Rio-based OGX. The shipbuilder in March announced a contract to construct 11 oil tankers for London-based Kingfish Trading Ltd.’s Brazilian unit for $732 million.

“Talks continue for the construction of rigs and are advanced,” OSX said in an e-mailed response to questions about possible deals with Petrobras. “Talks also reflect the diverse business opportunities that exist in the Brazilian oil and gas market in which OSX participates: leasing of off-shore production units, shipbuilding and operating services.” OSX has no current contracts with Petrobras, the company said.

American Shipyards

Batista’s shipbuilding arm isn’t the only potential beneficiary of delays at local yards. U.S. shipbuilders Tidewater Inc. and Hornbeck Offshore Services Inc. and rig suppliers Transocean Ltd. and Noble Corp. could also step in, according to James West, an analyst at Barclay’s Capital.

“The rig count is ramping up so they need more vessels to support all the expansion,” West said in a June 29 phone interview from New York. “There are more and more vessels heading into Brazil every year. There’s a lot of competition in Brazil with local providers, and OSX will obviously be one of those.”

Petrobras intends to take its total vessel count to 578 in 2020 from 280 in 2010, according to West.

As for EAS, the tanker company whose contract was suspended, Petrobras fined it for the delays and gave it until Aug. 30 to find a new partner.

New Partner

South Korea’s Samsung Heavy Industries Co. quit the EAS partnership in March. While EAS has informed Petrobras’s transportation unit that it has signed an agreement with a new technological partner from Japan, the shipbuilder must comply with further conditions before the suspension is lifted, Transpetro, the shipping unit, said in an e-mailed response to questions.

EAS’s new technology partner is Tokyo-based IHI Marine United Inc., the shipbuilder’s external press office said in an e-mailed statement. The press office referred questions on the Transpetro contract to Transpetro.

The Petrobras unit plans to acquire 49 new tankers by 2016 as the parent plans to boost output to about 5.7 million barrels a day in 2020 from 2.4 billion in 2011. The company, Latin America’s largest by market value and producer of 93 percent of Brazil’s oil in May, seeks to increase output in Brazil to about 4.9 billion barrels from the current 2.02 billion as it taps so- called pre-salt reserves.

Salt Layer

Trapped under a layer of salt beneath the Atlantic seabed as far as 300 kilometers from the Rio de Janeiro coastline, the at least 50 billion barrels of pre-salt deposits discovered in 2007 are the biggest discovery in the Americas since Mexico’s Cantarell field was found in 1976. Spain’s Repsol SA, Portugal’s Galp Energia SGPS SA and the U.K.’s BG Group Plc also have stakes in pre-salt fields off Brazil.

“OSX’s original business plan, and what the markets take into account, is that they would only supply OGX,” said Jose Luiz Garcia, a portfolio manager at Rio de Janeiro-based investment fund Mercatto Gestao de Recursos. “Any orders it gets from others parties will be positive for OSX. Given the share price, I don’t think the market is considering that possibility.”

By Rodrigo Orihuela (c) 2012 Bloomberg.

Sergio Buarque de Holanda. Photo: Petrobas

RIO DE JANEIRO–Brazilian state oil and gas producer Petroleo Brasileiro S/A (PBR. PETR4.BR), or Petrobras, took delivery Monday of a third oil tanker under its current 10.8 billion-Brazilian-reais ($5.32 billion) shipbuilding program, Petrobras transport arm Transpetro said.

The tanker, named Sergio Buarque de Holanda after a Brazilian writer, is 183 meters long with capacity to transport 56 million liters of fuel, Transpetro said. It’s the 200th ship to be built by Brazil’s Maua shipyard in Rio de Janeiro state, Transpetro said.

Petrobras’s Promef ship modernization and construction program foresees a total investment of BRL10.8 billion on 49 ships that will be used by the oil and gas company, for delivery by around 2016. The first two tankers were delivered in November and May, also built by Brazilian shipyards, and a fourth is due for delivery before the end of this year.

Transpetro’s president, Sergio Machado, said that the ship delivered to Petrobras in November, named Celso Furtado, was the first Brazilian-made ship to be acquired by Petrobras in 14 years.

“After 14 years without building any oil tankers, the Brazilian shipbuilding industry is starting to gain pace,” Mr. Machado said at a ceremony to mark the ship’s delivery. “We’re going to concentrate now on seeking greater productivity, to allow the sector to gain international competitiveness.”

Brazil has the fourth biggest order book for ships worldwide, Mr. Machado said.

Copyright © 2012 Dow Jones & Company, Inc.