Development under way following record financing package for Barracuda-Caratinga fields

Sept. 11, 2000
When Brazil's Petroleo Brasileiro SA completed financing in June for $3.59 billion in international credit for developing oil and gas fields in the Campos basin off Brazil, it was the largest project financing package in the company's 47-year history.
The P-34 floating production, storage, and offloading system was modified for Petroleo Brasileiro's pilot production project in Barracuda oil field in the deepwater Campos basin off Brazil. It has 34 turret lines and the most production risers of any FPSO. The FPSO was converted from the MV Presidente Prudente de Moraes oil tanker. The turret system moored the FPSO at a depth of 2,573 ft. Photo courtesy of Petrobras.
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When Brazil's Petroleo Brasileiro SA completed financing in June for $3.59 billion in international credit for developing oil and gas fields in the Campos basin off Brazil, it was the largest project financing package in the company's 47-year history.

Of that total, $2.5 billion was allocated for developing Barracuda and Caratinga fields-currently producing early oil via a pilot production system-and $1.1 billion was for additional development of the currently producing Espadarte, Voador, and Marimba fields.

The latest arrangements bring total financing for exploration and production projects in the Campos basin this year to $4.45 billion, including $850 million in financing for Cabiunas field, says Petrobrás.

The deal enabled the immediate full development of the Barracuda and Caratinga deepwater oil fields. Under terms of a contract between Petrobras and Halliburton Co. (OGJ Online, July 6, 2000), Halliburton's Brown & Root Energy Services (BRES) and Halliburton Energy Services business units, together with Petrobras's exploration and production unit, are developing the Barracuda-Caratinga fields. Petrobras will operate the fields-and lease the facilities for 10 years-but the Halliburton units will undertake the bulk of the development work.

Novel financing scheme

Under a novel financing scheme, Barracuda Caratinga Leasing Co. BV (BCLC), a special-purpose company established by Japanese companies Itochu Corp. and Mitsubishi Corp. and incorporated in the Netherlands, signed the loan documents after 2 years' effort to complete the deal. Deutsche Bank Securities Inc., Itochu, and Mitsubishi acted as co-global coordinators to secure the funding, which is being provided by a consortium of international lenders.

"This is the largest financing arranged for Petrobras's offshore development program and largest financing for an offshore field development completed in the Americas," said Gregory Moroney at the time of the loan. He is managing director and head of oil and gas project finance at Deutsche Bank Securities. Petrobras is providing $518 million of its own financial resources toward the project.

The lending groups include Japanese Bank for International Cooperation (JBIC), which is advancing up to $1.14 billion; Itochu-Mitsubishi, up to $100 million; Deutsche Bank AG; and Industrial Bank of Japan.

In addition, BNP Paribas and HypoVereinsbank have jointly underwritten a $500 million senior secured bank loan as lead arrangers. And Brazil's Banco Nacional de Desenvolvimento Economico e Social (BNDES) and Agência Especial de Financiamento Industrial of Brazil are advancing up to $800 million for local equipment purchases. The loans include a 3-year construction period and a 7-year amortization period, with a final maturity of 10 years.

Japan's Ministry of International Trade & Industry (MITI) and the Multilateral Investment Guarantee Agency (MIGA), a Washington, DC-based World Bank Group member, have committed to political risk insurance for the $500 million bank loan.

The lead banks syndicated the loan and received commitments from Banca Commerciale Italiana/Sudameris, Bank of America, Dresdner Bank, Santander Investment Securities Inc., Dai-Ichi Kangyo Bank Ltd., and ING Bank as co-arrangers.

Espadarte, Voador, Marimba

Although Espadarte, Voador, and Marimba fields are already producing, the additional financial resources are being used for concluding their development. Combined production from Espadarte-Voador-Marimba is expected to reach 147,000 b/d of oil and 2.5 million cu m/day of natural gas in 2001.

For this project, JBIC is providing financing of $508 million; BNDES, $260 million; a commercial bank syndicate, $200 million; Japanese companies Mitsui Corp. and Marubeni Corp., $123 million; and Petrobrás, $139 million. Total projected investments are $1.23 billion.

Also participating in the project financing is Bank of Tokyo Mitsubishi, Fuji Bank Ltd., Chase Manhattan Corp., ABN-Amro Inc., Australia & New Zealand Banking Group Ltd., Credit Suisse First Boston, Credit Agricole-Indosuez, and Dresdner Bank. MITI and MIGA also have assumed the political and commercial risk for Espadarte-Voador-Marimba.

For Espadarte-Voador-Marimba, the financing period is 7 years. Both financings are structured as project finance. Investments are owned by specific-purpose companies outside Brazil that are making the financing available to Petrobras as mercantile leasing, or freighting, in the case of the FPSOs. In this way, there will be little effect on Petrobras's indebtedness.

At the end of the projects, Petrobras will be able to acquire the equipment outright.

Barracuda-Caratinga development

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Barracuda field was discovered in June 1989 and Caratinga in February 1994. They are located in the central area of the Campos basin in 670-1,200 m of water. The Campos basin is located on the continental shelf off southeastern Brazil. It occupies an area of 100,000 sq km (38,610 sq miles) between Victoria in Espirito Santo state and Arrial do Cabo in Rio de Janeiro state. As the richest oil-bearing basin in Brazil, the Campos basin accounts for about 70% of the country's oil and gas supply. With Brazil's oil and gas consumption projected to reach 2.5 million boe/d by 2001-02, the new fields will help keep oil imports from exceeding their current level of 40%.

Petrobras will develop the fields under a concession from Agência Nacional do Petróleos (ANP), Brazil's national petroleum agency. Development includes drilling, facilities construction, and start-up and operation of facilities for the production, processing, sale, and delivery of oil and by-products produced from the fields.

The recently concluded principal agreement with Halliburton includes a lump-sum engineering, procurement, and construction (EPC) contract between BRES and BCLC.

The EPC contracts include work related to drilling of 51 wells; fabrication and installation of flowlines and risers; construction and installation of two floating production, storage, and offloading vessels (FPSOs); and commissioning, start-up, and operations support for both fields. Each FPSO will have storage capacity of two million bbl and a production capacity of 150,000 b/d of oil. Work representing more than 40% of the value of the FPSOs will be performed in Brazil, including the hull conversion of one ship. Work is scheduled to begin immediately.

The fields' previously installed P-34 FPSO, which started up in September 1997, currently produces oil as part of a pilot system (see photo). Output from this pilot phase is expected to reach 45,000 b/d of oil and 400,000 cu m/day of natural gas.

Petrobras expects combined production from Barracuda-Caratinga to reach 247,000 b/d of oil and 3.4 million cu m/day of natural gas by 2004-05.