The deal marks China’s latest move to win influence over Western-owned energy assets to feed its fast-growing economy. It is also Sinopec’s major purchase in Brazil in just a year after it made a $7 billion purchase from Repsol for a 40 percent stake in its Brazil division.
“For Sinopec, there are not many opportunities to grow in the traditional domestic upstream oil and gas sector — overseas acquisition is an area to find growth,” said UOB Kay Hian analyst Yan Shi.
“It will benefit Sinopec on upstream reserves, and reduce risks in its money-losing downstream operation.”
Sinopec, Asia’s biggest oil refiner, expected the deal will expand its overseas oil and gas business operations and boost its oil and output growth.
Galp’s primary assets in Brazil include four deep-water blocks of BM-S-11, BM-S-24, BM-S-8 and BM-S-21 in the Santos Basin, it said.
Sinopec expected it would receive 21,300 barrels of oil equivalent per day (boedp) in 2015 and production would reach a peak of 112,500 boedp in 2024.
Under the agreement, Sinopec’s wholly owned unit, Sinopec International Exploration and Production Corp (SIPC), will take new shares to be issued by Galp and assume shareholder loans, Sinopec Group said in a statement.
“Taking into consideration this investment and projected future capital expenditure, the total cash payout amounts to approximately $5.18 billion at closing,” Sinopec said.
The transaction must be approved by the Chinese government.
China’s outbound M&A deals this year totaled $37.6 billion, down from $54.1 billion last year, according to Thomson Reuters data.
The deal would help Galp, a newcomer to large-scale oil projects, to finance its stake in the development of massive oil fields in the deepwater region known as the subsalt region in Brazil–site of the largest oil discovery in the Americas in more than 30 years.
“This capital increase significantly strengthens Galp Energia’s capital structure, fully securing its funding needs for the future expansion and development of its upstream activities,” Galp said in a statement.
Sinopec’s overseas acquisition strategy is partly guided by the desire to build up scale in certain countries, including Brazil, said a company official who declined to be named.
Galp is a minority partner with Brazil’s state-run oil company Petrobras in key offshore discoveries, including the vast Lula field, formerly known as Tupi, as well as the Cernambi and Iara finds.
Sinopec Group is the parent of Hong Kong-listed and Shanghai-listed China Petroleum & Chemical Corp. The group does overseas upstream oil and gas investment and operations via its wholly owned unit SIPC.
By Judy Hua, Wan Xu and Ken Wills (Reuters)
- China’s Sinopec buys $5.2-billion stake in Brazil’s Galp (business.financialpost.com)
Dresser-Rand Group Inc. , a global supplier of rotating equipment and aftermarket parts and services, has been awarded compression equipment and services valued at more than $700 million by TUPI B.V. (Petrobras 65% and operator, BG Group 25%, Petrogal Brasil S.A – Galp Energia 10%) and GUARA B.V. (Petrobras 45% and operator, BG Group 30% and Repsol-Sinopec 25%).
The equipment, which includes up to 80 DATUM compressor trains, will be installed on eight (8) “replicant” floating, production, storage and offloading (FPSO) vessels. Six of these vessels will be located in the Lula field (formerly known as Tupi) and two in the Guara field. Training, aftermarket services and two 10-year maintenance contracts are also included as part of the award.
According to Vincent R. Volpe Jr., Dresser-Rand’s President and CEO, “We are proud to announce this significant award, and, more importantly, appreciative of the confidence that Petrobras and its partners have placed in us to supply all the compression trains for all services on these eight FPSOs. We believe that this is a clear statement by a highly respected Client of their confidence in our Company’s technology, execution capability and ongoing technical and field support. The award for all of the compression trains on this project reflects our Company’s strength of offerings in the Upstream Segment, which we project will be the largest area of growth in the Oil and Gas markets in the coming years.”
According to Jesus Pacheco, Dresser-Rand’s executive vice president, New Equipment Worldwide, “We believe in the value proposition our technology can bring to our end user Clients in this market. On this program, we bring proven leading-edge technology to increase the throughput, maintainability and reliability of these key assets. Building on previous compression solutions we have delivered for the Petrobras Pilot I, II and III FPSOs, we again eliminated the need for additional topsides equipment, specifically, separate CO2 pumping systems, saving space and weight, reducing the complexity of the overall plant, while increasing reliability. As the sole solutions provider for all topsides compression equipment, we are able to ensure all services are fully integrated to optimize overall plant operability. In addition, we have also maximized standardization of spare parts, maintenance practices and control systems to reduce inventory and maintenance costs.
“It is also important to note the positive impact this technology has on making these assets more environmentally sustainable. Higher compressor efficiencies possible by the use of our DATUM product line reduce the carbon footprint of these FPSOs as they require less power to meet the specified duties. With higher efficiency, better maintainability and higher reliability, and a smaller carbon footprint, we directly contribute to reducing the life cycle costs of the assets, which makes our Clients more competitive in the markets they serve.”
Consistent with the Company’s commitment to support localization initiatives in its served markets, a high portion of added value on this program will be performed in Brazil. This will include sourcing, project management and engineering, further development of local service support capabilities and packaging in a newly planned facility in the Industrial Corridor near Sao Paulo, which will further expand the Company’s in-country service capabilities.
On September 6, 2011, Dresser-Rand disclosed that it had been selected as the supplier for all the compression needs of these FPSOs. However, at the time, the Company cautioned that any actual award remained subject to the approval of Petrobras’ Board of Directors and its Partners. Those approvals have now been obtained. More than $400 million and $70 million will be reflected in its third quarter 2011 New Units and Aftermarket bookings, respectively. The Aftermarket booking amount is consistent with the Company’s accounting policy to only book the portion of the Aftermarket orders that will be delivered in the first 15-months of long-term service agreements.
On the basis of this project the Company reiterates its guidance that the new unit bookings for 2011 may be at the top end of, or even exceed, the guidance previously provided of $1.4 to $1.6 billion.
- Modec Receives FPSO Order from Petrobras, Brazil (mb50.wordpress.com)
- Keppel Shipyard Lands $142 Million In Conversion Contracts (gcaptain.com)
MODEC announced today that Petróleo Brasileiro S.A. (“Petrobras”), through its subsidiary Tupi B.V., on behalf of Consortium BM-S-11, has signed a Letter of Intent (LoI) for the supply, respectively, charter, and operations of a Floating, Production, Storage, and Offloading (FPSO) vessel for the BM-S-11 block (Cernambi South) in the giant “pre-salt” region of the Santos Basin with its water depth of 2,300m.
The BM-S-11 block is under concession to a consortium formed by Petrobras (65%), BG Group (25%), and Petrogal Brasil S.A – Galp Energia (10%).The LoI was issued to the Schahin Group and MODEC, Inc., who have partnered for the latest leased FPSO. This is the second venture between the Schahin Group and MODEC, Inc.
The Schahin Group and MODEC, Inc. are responsible for the engineering, procurement, construction, mobilization, and operation of the FPSO, including topsides processing equipment as well as hull and marine systems. SOFEC will design and provide the spread mooring.
MODEC will convert the VLCC Sunrise J into the FPSO Cidade de Mangaratiba MV24. The FPSO will be capable of processing 150,000 barrels of oil per day, 280 MM standard cubic feet of gas per day and has storage of 1,600,000 barrels of total fluids. Scheduled for delivery during the 3rd quarter of 2014, the FPSO will be installed in the Cernambi South area.
This is the eighth vessel MODEC will provide and operate in Brazil. MODEC is currently operating the FPSO Fluminense, the FPSO Cidade do Rio de Janeiro MV14, the FSO Cidade de Macae MV15, the FPSO Cidade de Niteroi MV18, the FPSO Cidade de Santos MV20 and the FPSO Cidade de Angra dos Reis MV22. The FPSO Cidade de Sao Paulo MV23 is currently under construction and scheduled to be installed in the fourth quarter of 2012.
“We are very happy to be awarded the third vessel for the pre-salt discoveries. And we are committed to carry out the project by maximizing Brazilian local content in order to contribute to the foundation for the development of heavy industry in Brazil,” said Toshiro Miyazaki, President and CEO of MODEC, Inc.
The Schahin Group has a significant presence in the drilling services market and has been working with Petrobras Group and Consortia of which Petrobras has been participating since 1982. The Schahin Group is pleased to expand in to production services via the partnership with MODEC and Petrobras Group and Consortia in which Petrobras participates.
- Deep water Brazil: To venture where no driller has gone before (mb50.wordpress.com)
- SBM Offshore Signs Contract For FPSO Cidade de Paraty (gcaptain.com)
- Westshore Shipbrokers: Ultra-Deepwater, What is Next for the Shipowner? (Brazil) (mb50.wordpress.com)
The EWT is under way on the BW Cidade de São Vicente FPSO, anchored at a depth of 2,120 meters. Output should be around 14 thousand barrels of oil per day.
The information gathered during the Lula Nordeste EWT will help in project development for the finalized production system to be set up in the Lula field under the name Lula Nordeste Pilot, and run on the Cidade de Paraty FPSO.
- Modec Receives FPSO Order from Petrobras, Brazil (mb50.wordpress.com)
- Brazil: Dresser Rand to Equip 8 FPSOs with Compression Equipmen (mb50.wordpress.com)
- Petrobras Announces New Discovery in Carioca Area, Offshore Brazil (mb50.wordpress.com)
- Expro Wins Wireline Contract in Brazil (mb50.wordpress.com)
- Sinopec to Buy Galp’s Offshore Asset in Brazil for USD 3.5 Billion (mb50.wordpress.com)
- Petrobras production hurt by ‘global bottleneck’ for rigs (mb50.wordpress.com)
- Petrobras Discovers Oil at Tucura Well, Campos Basin, Offshore Brazil (mb50.wordpress.com)
- Petrobras Has ‘Many’ Offers for $13.6 Billion of Assets (businessweek.com)
- Brazil: Petrobras Discovers Hydrocarbons in Campos Basin (mb50.wordpress.com)