Petrobras and Partners Award Three FEED Contracts to Obtain Best Option to Develop Floating LNG Terminal

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Researched by Industrial Info Resources (Sugar Land, Texas)--Brazilian energy company Petroleo Brasileiro SA (NYSE:PBR) (Petrobras) (Rio de Janeiro, Brazil), together with joint venture partners BG Group plc (OTC:BRGYY) (Reading, England), Repsol YPF SA (NYSE:REP) (Madrid, Spain) and Galp Energia SGPS SA (ELI:GALP) (Lisbon, Portugal) has awarded three front end engineering and design (FEED) contracts in association with plans to build a floating liquefied natural gas (FLNG) unit.

By awarding three separate contracts, the companies hope to drive competition among contenders and reduce unit prices. The three contract winners will work separately and in parallel on the FEED projects, with a completion by December 16, 2010.

Following this, the joint venture partners will examine the proposed solutions and other alternatives in 2011, before a decision is made on the best possible option.

The three lump sum contracts have been awarded to the Saipem SpA (BIT:SPM) (Milan, Italy); a consortium of Netherlands-based SBM Offshore NV (AMS:SBMO) (Scheidam) and the Chiyoda Corporation (TYO:6366) (Yokohama, Japan); and another consortium consisting of Technip SA (OTC:TKPPY) (Paris, France), JGC Corporation (TYO:1963) (Tokyo, Japan) and Modec Incorporated (TYO:6269) (Tokyo).

The Petrobras joint venture, of which Petrobras owns 51.1% and the other partners hold equal shares of the remaining 48.9%, is considering alternative methods for handling the oil and gas produced by a series of floating production storage and offloading (FPSO) vessels expected to be put into operation to develop the pre-salt reservoirs in the Santos Basin, located about 300 kilometers off the coast of Brazil.

The successful FLNG solution will then be used as the basis for a new tender, open to the three groups developing the FEED projects, that will cover the building and operation of the project. The joint venture is hoping to complete the project by July 2015.

The FLNG will be required to operate in the BM-S-9 and BM-S-11 blocks of the Santos Basin, where the water depth is about 2,200 meters. The unit will operate close to the FPSOs, from which it will receive and process up to 14 million cubic meters of gas per day. In total, the unit will process about 2.7 million tons per year of LNG and 1 million tons per year of liquefied petroleum gas (LPG).

Once liquefied, LNG will be transferred to vessels that will deliver it to the regasification terminals operated by Petrobras at the Pecém Industrial and Port Complex in the state of Ceará in northeastern Brazil and at Guanamara Bay in the state of Rio de Janeiro. The regasified LNG will be injected into the gas pipeline network.

The Santos Basin covers an area of 352,260 square kilometers and is one of the largest sedimentary basins off the coast of Brazil. The basin contains several significant oil fields, including the Tupi and Jupiter oil fields, but the recovery of the oil and gas poses distinct challenges to developers because of the overlying layers of salt-containing rocks that extend to a thickness of 2,000 meters. Well drillers will have to cope with drilling through more than 2,000 meters of rocks under 2,200 meters of water.

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