Brazilian state-controlled Petroleo Brasileiro S.A. or Petrobras (PBR) has recently awarded a 15-year floating storage and regasification unit (FSRU) manufacturing contract to the Woodlands, Texas-based Excelerate Energy. However, the financial terms of the agreement were not disclosed.
The newbuild vessel, to be named VT3, will have a storage capacity of 173,400 cubic meters, thereby making it the largest FSRU in the industry. The unit will be designed to deliver 20 million cubic meters/day of natural gas to the southeastern region of Brazil.
The vessel, which can operate both as an FSRU and a fully tradable liquefied natural gas (LNG) carrier, is slated to come online in May, 2014. Hence, starting July 2013 until the start-up of VT3, Petrobras’s Guanabara Bay LNG terminal will utilize Excelerate’s Exquisite FSRU with an increased re-gasification plant and expand the terminal’s delivery capacity to 20 million cubic meters per day from 14 million cubic meters per day.
Headquartered in Rio de Janeiro, Petrobras primarily engages in exploration, exploitation and production of oil from reservoir wells, shale and other rocks, in refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons as well as in other energy-related activities.
We believe that Petrobras is poised for long-term growth based on the steady demand growth in Brazil, together with all the new investments and acquisitions. Additionally, we expect the company to benefit from its expertise in deep-water operations, huge recent discoveries (which could double its resource base) and the growing domestic refined products market.
However, we remain apprehensive about the company’s huge investment requirements, operational risks typical to an exploration and production company and tough competition from peers, such as BP Plc (BP) and Royal Dutch Shell plc (RDS.A). Unpredictable energy prices and government regulations also add to the negative sentiment.
Hence, we are maintaining our long-term Neutral recommendation on the stock.
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