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Pernambuco Governor Edudardo Campos and Brazilian President

Pernambuco Governor Eduardo Campos (left) and Brazilian President Lula da Silva at contract signing ceremony

February 1, 2007

Transpetro orders first ten tankers in expansion program

Transpetro, the tanker arm of Brazilian national oil company Petrobras, yesterday signed an agreement with the Atlantico Sul Consortium in Pernambuco, for the construction of the first ten oil tankers foreseen in the company's modernization and expansion program.

The Transpetro program is a key element of Brazilian government plans to revive the country's shipbuilding industry.

The $1.2 billion order for the first ten ships is backed by 2.47 billion real ($1.16 billion) in financing from Brazil's National Development Bank, BNDES.

The contract signing ceremony was held at the Suape Port Industrial Complex. Brazilian President Luiz Inacio Lula da Silva; Pernambuco Governor Eduardo Campos, Petrobras president Jose Sergio Gabrielli de Azevedo and Transpetro president, Sergio Machado, attended the event.

The vessels, ordered from the Atlantico Sul Consortium, are part of the 26-ship first phase of the Transpetro program.

It is expected that the program will create 11,000 new jobs in Pernambuco alone.

The other vessels, ordered in this first phase of Transpetro's project, will be built by the Rio Naval Consortium and Maua Jurong Shipyard in Rio de Janeiro and the Itajai Shipyard in Santa Catarina shipyards

Bid results were announced in March last year.

Petrobras says the the total value of the 26 vessels ($2,483,479,543) was only 1% above what would had been paid in the international market, considering the company's strict tanker design and construction requirements. (Some observers may take this estimate of the price differential with a grain of salt. The average price of the first ten Suezmaxes is almost $121 million a copy. That compares with an average $80 million newbuilding price for 150,000 dwt Suezmaxes reported in the latest Fearnley's weekly)

In total, the Transpetro program foresees the construction of 42 vessels. The goals are to: replace vessels, modernize and boost the company's self-owned fleet; increase Petrobras System's transportation capability; and contribute to revitalizing Brazilian shipbuildingconstruction segment, promoting Brazilian development by generating technology, jobs, and income.

The second phase will be implemented immediately after the first phase agreements are signed, and will lead to the construction of 16 more vessels.

Lot 1 (10 Suezmax vessels) - Atlantico Sul Consortium, formed by Camargo Correa, Andrade Gutierrez, Queiroz Galvao, Aker Promar, and Samsung.
Total price: $1,209,500,000
Average price, per vessel: $120,950,000
Lot 2 (five Aframax vessels) - Rio Naval Consortium, formed by MPE Participacoes e Administracoes S.A., IESA Projetos, Equipamentos e Montagens S.A., and Sermetal Estaleiros S.A, with technological partnership with Hyundai.
Total price: $517,000,000
Average price, per vessel: $103,400,000
Lot 3 (four Panamax vessels) - Rio Naval Consortium
Total price: $349,000,000
Average price, per vessel: $87,250,000