Transpetro Gives EAS a Second Chance, Calls for the Construction of Four Tankers

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November 16, 2012

RIO DE JANEIRO—-The transportation arm of Brazilian state-owned energy giant Petroleo Brasileiro SA (PBR, PETR4.BR), or Petrobras, said Friday that it had given troubled shipyard Estaleiro Atlantico Sul the green light to build four oil tankers, partially lifting a suspension implemented earlier this year.

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.

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