Japan Bank for International Cooperation (JBIC) has signed a project loan agreement for a Floating Production Storage and Offloading (FPSO) vessel for the Petrobras Marlim field off the coast of Brazil. The FPSO will be built and owned by Dutch company Marlim1 MV33 B.V. (MMV33), which is incorporated by Japanese offshore specialist MODEC, Mitsui & Co, Mitsui OSK Lines, and Marubeni Corporation.
The FPSO unit will have the capacity to produce up to 80 thousand barrels of crude oil and 248 million cubic feet of gas per day from the Marlim 4 field, and store one million barrels of crude oil.
MMV33 will provide FPSO vessel chartering services, including leasing, operation and maintenance services, to Brazilian state-owned Petrobras for 25 years.
The loan, which was signed on October 9, is provided under JBIC's Growth Investment Facility, with the Japanese credit agency lending US$352 million. It is co-financed with MUFG Bank, Sumitomo Mitsui Banking Corporation, Mizuho Bank, Societe Generale, Clifford Capital Pte. Ltd, Standard Chartered Bank and BNP Paribas.
The total co-financing amount is approximately US$969 million. Nippon Export and Investment Insurance (NEXI) will provide the insurance for a part of the loan by the private financial institutions.
JBIC said that, for the project, Japanese companies are providing FPSO charter services while improving their technologies regarding the operations and maintenance of FPSO systems, as well as increasing their project management know-how. The project will thus contribute to increasing and maintaining the international competitiveness of the Japanese offshore resource development industry.
The Japanese government's Basic Plan on Ocean Policy emphasizes technology advancements for the development and commercialization of marine resources in waters around Japan. In this context, the business operation by MODEC and others in this project is also expected to contribute to a secure and stable supply of natural resources to Japan in the long term.
According to JBIC, as a number of oil-developing countries have been actively developing offshore oil fields in recent years, the demand for new FPSO systems is expected to increase, particularly in South America (namely Brazil) and West Africa.
Petrobras is engaged in developing many offshore oil fields in Brazil. MODEC views Brazil as the most important market for its FPSO business. This will be the 13th FPSO vessel chartering service provided by MODEC to Petrobras.
In August 2019 MODEC refinanced JBIC and commercial bank debt for an FPSO via the international bond markets. Once an FPSO is past the construction stage, and has been operating on charter for several years, the risk associated with its project debt is reduced, making it suitable for bond market investors.
The FPSO Cidade de Mangaratiba MV24 achieved first oil production in October 2014 in the Iracema Sul pre-salt oil field. At this point the 20-year charter of the FPSO began, to a consortium formed by Petrobras (65%), Royal Dutch Shell plc (25%) and Petrogal Brasil S.A. (10%) under a fixed price charter contract.
The US$1.1 billion transaction was the first project bond for an FPSO project sold in the Regulation S/Rule 144A market, and was sold to a broad range of international investors outside Japan, mainly in Europe and the United States.
Proceeds from the issuance of the project bond were used to refinance the project finance, and make a distribution to the FPSO sponsors, MODEC, Mitsui & Co, Mitsui O.S.K. Lines and Marubeni Corporation.
The 14.8-year bond issued by MV24 Capital BV is listed in Singapore. The offering was led by Citigroup, Mizuho Securities, Morgan Stanley, and SMBC Nikko.
Given the high cost of FPSOs, the 2019 deal was a step towards strategically diversifying financing sources for MODEC's FPSO fleet. And with strong institutional demand for long-term infrastructure debt, in order to generate portfolio yield in a low interest rate environment, more such project bonds for FPSOs are expected in the future.