Petrobras, Keppel in Talks on Large New Oil Rig

Jun 18, 2007 (Dow Jones Newswires)

Brazil's state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, and a unit of Singapore's Keppel Corp. (KPELY) are negotiating a large contract for the construction of a new oil rig, a Petrobras press official said Monday.

The P-56 rig will be a copy of the P-51 rig, which Keppel's Brazilian unit Keppel Fels is currently building in consortium with Technip Engenharia SA, the Brazilian unit of French oil engineering company Technip SA (TKP).

Petrobras said the cost for the construction of the P-56 rig was still subject to negotiations. The P-51 will cost about $830 million once it is completed, the press official said.

Petrobras couldn't confirm Singaporean press reports saying that the order for the P-56 could be worth as much as $1.2 billion. Construction costs of oil rigs for Petrobras have soared in recent years because of higher costs for steel and service providers.

Earlier this year, Petrobras canceled bidding processes for two platforms because of excessive costs.

The press official couldn't say how long the negotiations with Keppel are expected to take. Media reports had said the two companies could reach a deal by the end of June.

The P-56 is slated to produce from the Marlim Sul field in Brazil's oil-rich Campos Basin off the coast of Rio de Janeiro state. In April, Petrobras produced 1.779 million barrels of oil in Brazil, out of which 1.477 million came from the Campos Basin.

Petrobras is legally required to hold public tenders for bids for the construction of most new oil rigs, but won't have to hold a tender for the P-56 as it is slated to be built as a copy of the P-51, the company press official said.

Brazilian President Luiz Inacio Lula da Silva said Thursday he wanted to see the P-56 built as soon as possible, but insisted its construction be done in Brazil.

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