Galp signals year of Brazil delays

12 March 2015, News Wires – A widening corruption probe into Brazil’s state-run oil company Petrobras is likely to delay by at least one year four major offshore oilfield projects, Portuguese partner Galp Energia said, in a first sign of strain on foreign investors.

Galp, which is involved in nearly 30 on-shore and off-shore oil and gas projects in Brazil, flagged a one-year delay in the building of production ships for the Lula Sul, Lula Norte, Lula Extremo Sul and Lula Oeste fields, which it is developing with Petrobras.

“We have assumed on average a one-year delay in the pre-salt projects,” Galp chief executive officer Manuel Ferreira De Oliveira told investors in London on Tuesday.

“We’ve looked unit by unit at the state of development and conditions of the subcontractors. This was a deep exercise that the company did for itself and the level of uncertainty is still high and we are fully confident that we are conservative to say that on average we see a one-year delay.”

The uncertainty is expected to lead to delays in the delivery of four locally-made floating production storage and offloading (FPSO) units after contractors have either gone bankrupt or been banned from receiving money from Petrobras due to the corruption scandal, an industry source said.

Galp’s forecast comes before Petrobras issues its own guidance on project development in light of the investigation which has forced the resignation of its top management over suspicions of price-fixing, bribery and political kickbacks that have engulfed Brazil’s President Dilma Rousseff.

Britain’s BG last month maintained a forecast to have delivery of five FPSOs next year, but said it is “keeping a very close watch on any potential impact” from the probe.

The problems will delay a planned increase in output capacity by 600,000 barrels a day in the BM-S-11 block south of Rio de Janeiro that was purchased by Petrobras, Galp and BG Group in 2000.

The Lula field, now in test production, produced 278,000 barrels a day of oil and 12.1 million cubic metres of gas a day in January, Brazil’s oil regulator ANP says.

BM-S-11 is believed to hold about 8 billion barrels of oil in several fields and was the first major discovery in Brazil’s giant “sub-salt” province first announced in 2007.

Petrobras is the operator of fields in BM-S-11 and owns 65%. BG owns 25% and Galp 10%.

– Upstream

About the Author