Compliance issues may take Exmar from Búzios V

11/16/18

Conformity and difficulties in obtaining guarantees and financing threaten the contract

 

Exmar runs the risk of not being able to ratify the charter agreement with Petrobras for the Buzios V FPSO, scheduled to start operating in 2021, in the onerous assignment field in the Santos Basin. BE Petróleo found that the oil company detected a compliance problem with the Belgian group. For this reason, Petrobras asked Modec, second in the process, to revalidate its proposal, in the amount of US $ 815 thousand / day.

Exmar had won the bid with a proposed $ 635,000 daily fee. Although the negotiations between Exmar and Petrobras have been extended for five months and the process has already been submitted for discussion and analysis to the valuation committees and the Board of Directors, the compliance problem has only recently been discovered. It is speculated that the problem may be related to legal representation or related to group companies.

The request for proposal revalidation was forwarded by Petrobras to Modec last week. As prices were presented in June and the proposal involves multi-vendor budgeting, the trend is for the FPSO operator to take time to complete the work.

Despite requesting revalidation of Modec’s proposal, Petrobras officially keeps the process unchanged, even though sources say Exmar’s situation is fragile. For the time being, there is no formal position on a possible downgrade of the Belgian company, a call from the second place in the bid for negotiation or even the launch of a new bid.

However, the fact that Petrobras has requested a revalidation of the proposal for Modec is an indication that the oil company is not closed to negotiations. And, that at first, seems to prefer an intermediate alternative to launch a new bid, since in a new bid would have to follow the requirements of the new State Law (13.303 / 2016).  There is a unanimous perception that Modec, if called, will not cover the price of Exmar and that the negotiations will start from the price level of its proposal.

Aside from the recent issue of compliance, the deal between Petrobras and the Belgian group has been facing other difficulties since the beginning of the process, such as the open financing and guarantees situation. Exmar’s contracting schedule for the Búzios V FPSO was taken to the Petrobras Board of Directors and to the special committees more than once, without the issue having an internal consensus. In the debates, there was a prevailing concern about the actual capacity to execute the work, given the group’s limited experience in the construction and operation of large FPSO and the and price presented. The commercial negotiation between Petrobras and Exmar was completed at the end of August.

New hull and work in China

The Exmar proposal foresees the construction of the Búzios V FPSO from a new hull and division of the work between China and Brazil. The option to do the work in China is directly linked to the financing group, which has a stake in six shipyards in the region.

Búzios V would be the first Exmar FPSO, which operates a unit of this type in Libya. Although it is new to the FPSO segment, the group has experience in the field of gas vessels, holding more than eight FLNG vessels in the pipeline. It also operates in the cryogenic, cargo and transportation segment in various parts of the world, such as Africa and Oceania.

The Búzios V FPSO will be installed in the northern part of the field and will have the capacity to produce 180,000 barrels / day of oil and process 12 million m3 / day of gas. The term of charter will be of 21 years, with possibility of extension for equal period.

The tender for the charter of the unit was launched in May 2017, outside the rules of Law 13303/2016. At the time, both Exmar and Modec presented a proposal with high and low national content, option guaranteed in the announcement. However, as the price with the highest local commitment was not above Petrobras’ budget, the second envelope was not opened.

Misc Behard was also involved in the process, but was also declassified in the technical phase, having submitted a proposal for only minor local content.

Source: Brazil Energy

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