Brazil’s Petrobras has signed a letter of intent with Malaysian contractor MISC for the charter of a third large floating production, storage and offloading vessel to be deployed at the giant Mero field in the Santos basin pre-salt province.
It comes as the company and partners on the giant pre-salt block took a final investment decision on the Mero-3 project.
The Mero-3 FPSO, to be called Marechal Duque de Caxias, will be similar in size to the first two units ordered by Petrobras and will feature topsides modules able to process 180,000 barrels per day of oil and 12 million cubic metres per day of natural gas.
As reported by Upstream in late July, Petrobras and MISC were expected to sign the LOI for the floater this month.
$700,000 dayrate mooted
Financial terms were not disclosed, but industry sources previously suggested MISC offered a dayrate close to $700,000 for the floater, edging out Netherlands-based SBM Offshore.
MISC has already lined up seven Asian yards to tender for a major engineering, procurement and construction contract covering the provision of the unit.
The Marechal Duque de Caxias FPSO, which will be MISC’s first floater contract off Brazil, will be chartered for a period of 22.5 years and is set to enter operation in the Mero field in 2024.
The project calls for the drilling of 15 development wells, including eight oil producers and seven water and gas injectors, which will be linked to the FPSO through a rigid riser-based subsea structure yet to be contracted.
Mero is currently producing over 25,000 bpd through an extended well test with the Pioneiro de Libra FPSO.
Output in a commercial scale is due to begin next year with the Guanabara FPSO, to be supplied by Japan’s Modec. A second unit, the Sepetiba FPSO, was ordered with SBM and is earmarked to produce first oil in 2023.
'Resilient' large oil projects
Arnaud Breuillac, president exploration & production at project partner Total, said: “The decision to launch Mero 3 marks a new milestone in the large-scale development of the vast oil resources of the Mero field – estimated at 3 billion to 4 billion barrels.
"It is in line with Total's growth strategy in Brazil’s deep-offshore, based on giant projects enabling production at competitive cost, resilient in the face of oil price volatility.
“The Mero project will contribute to the group’s production from 2020 onwards, and we are targeting a production of 150,000 barrels per day in Brazil by 2025."
'Ushering in new era' at MISC
MISC chief executive Yee Yang Chien said: “It has been a two year journey in our march towards securing our first deep-water FPSO project in Brazil."
He added: "Marked by this achievement, we are ushering in a new era for MISC by undertaking a complex project with a huge investment that will ultimately lay the foundation for future international projects."
Luiz Hayum, senior analyst on Wood Mackenzie’s Latin America upstream team, said of the project sanction: “Mero is an advantaged project, with a breakeven price below $35 per barrel. This economic result is possible due to the high initial well productivity exceeding 30,000 barrels per day, resulting in low unit development costs.”
Hayum added: “MISC is a newcomer as a contractor for large pre-salt FPSOs. But the award shows that the Mero partners are committed to diversifying their contractor base and reduce development costs.”
Petrobras operates Mero with a 40% stake and is partnered by European supermajors Shell and Total on 20% each, while Chinese players China National Petroleum Corporation and China National Offshore Oil Corporation hold 10% each.
The partners intend to use Mero-3 as a pilot test for Hi-Sep, a Petrobras-patented technology focused on dense separation of associated gas with high carbon dioxide content through the use of subsea centrifugal pumps.
According to Petrobras, Hi-Sep is currently being defined and tested for future application in the Mero-3 project.
Petrobras is also tendering for a fourth FPSO to be installed in Mero with bids scheduled for 16 November.