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SBM looks for an end to 'unacceptable' situation

Floater giant exploring its options in Brazil as impasse over leniency agreement rumbles on after 10 months

SBM Offshore is exploring its options over future contract awards in Brazil as the Dutch floater player’s impatience over an impasse that prevents it landing new deals in the country grows.

The company this week branded as “unacceptable and unsustainable” the current status quo with regard to a leniency agreement struck almost a year ago, leaving it able to tender for work but unable to actually win contracts.

In July 2016, SBM reached a leniency agreement with state player Petrobras, the Ministry of Transparency, Oversight & Control, the Public Prosecutor's Office and the General Counsel for the Republic over historical corruption.

However, that agreement has since hit the buffers and remains to be passed by Brazil’s courts, leaving SBM effectively locked out of fresh work in what is the world’s leading market for floating production, storage and offloading contracts.

“It is slightly frustrating where we are,” chief executive Bruno Chabas said during an analyst call this week after the company’s latest trading statement, which showed a slight drop in first-quarter revenues.

Director of governance and compliance Erik Lagendijk said “the current situation is unacceptable and unsustainable,” adding that the company is “not excluding any course of action” in a bid to resolve the impasse.

Lagendijk said, however, that there are basically two courses of action open to SBM: to finalise the adjustment process of the leniency agreement; or to change the interpretation of rules governing the tendering process.

On the latter, Lagendijk said the company is currently speaking with state giant Petrobras and “authorities” which he did not specify. “It is fair to say that we are making some progress every now and then,” Lagendijk said, though adding: “I have to admit it is not always crystal clear to us as well.”

Despite the ban on winning new contracts, SBM is understood to be one of three floater stalwarts that have submitted technical and commercial offers to Petrobras for the large FPSO to be deployed in the giant Libra pre-salt field in the Santos basin.

However, when asked if SBM was tendering in Brazil, Chabas answered: “If we are basically not allowed to win contracts in Brazil, we are not going to tender for projects.”

Lagendijk added: “Tendering activity is not something we do for the fun of it and it is very expensive.”

SBM is, however, close to being confirmed as provider of an FPSO for ExxonMobil’s Liza oil project off Guyana.

The US supermajor is due to sanction the project mid-year, with SBM still technically in the front-end engineering and design phase. SBM also revealed it has bought an unidentified VLCC, with executives remaining tight-lipped on whether or not it was bought against an impending firm contract.

SBM and state-owned partner GEPetrol have won a new five-year contract extension to operate the Serpentina FPSO on the Zafiro field off Equatorial Guinea.

The company posted directional revenues of $420 million in the first quarter, down from $442 million a year earlier.