Like most offshore support vessel markets around the world, Brazil is in the doldrums, but there are some chinks of light at the end of the tunnel, as Rob Ward explains
A recent meeting of the Fundo de Mercante Marinha (FMM, or Merchant Marine Fund) has given the go ahead for R$9.15 billion (US$2.905 billion) to be spent on a number of shipbuilding projects. Some R$1.5 billion of that will go on offshore support vessels (OSVs).
After the 33rd general meeting of the FMM – a fund that raises billions of dollars every year from the AFRMM tax on all Brazilian imports to fund shipbuilding projects – was held at the Ministry of Transport, Ports and Civil Aviation in Brasilia, a number of OSV operators look set to gain funding for newbuilds, conversions and much needed repairs.
The biggest winner is Bram Offshore Transportes Marítimos Ltda (a subsidiary of Edison Chouest Group), which will receive just over R$1 billion to build six large PSV 4500 platform supply vessels at their Navship shipyard in Itajaí, in the southern state of Santa Catarina.
The Navship facility was built back in 2006 and has helped Bram Offshore build up one of the biggest fleets of OSVs operating in Brazil today. Navship’s most recently delivered newbuild was the PSV 4500 Mr Aldo, which entered service with Petrobras in February, making it the 15th Bram Offshore vessel currently chartered in by the Brazilian oil giant.
The Brazilian-flagged ship was launched in November of last year and was ordered two and a half years ago when the market was going reasonably well. Because the vessel was ordered under a Prorefam (programme to renew the Brazilian OSV fleet) contract for eight years, Mr Aldo should have regular work, but Petrobras has at times found reasons not to adhere strictly to such charter arrangements.
The latest available figures from the Brazilian Association of Offshore Support Vessel Operators (ABEAM) show that Bram Offshore is currently operating around 55 OSVs, of which all but eight are Brazilian-flagged, so are either built in Brazil or re-flagged. Bram Offshore’s fleet includes more than 40 PSVs and oil spill response vessels (OSRVs), eight anchor-handling tug/supply (AHTS) vessels, a multipurpose OSV and half a dozen other vessels.
Armando Freigedo Rodrigues, a director with the Aquapar offshore consultancy in Rio de Janeiro, said that the Navship/Bram success story continues to grow, despite very difficult trading conditions.
“These guys got the formula for success right, very early on when they came to Brazil,” said Mr Rodrigues. “They built a lot of ships using FMM money, and now they have the biggest Brazilian-flagged fleet in the country.
“The news from the FMM is welcome, as things have been almost at a standstill for quite some time. Petrobras is not ordering any more new vessels, and although there have been a few circulars from them regarding chartering in some vessels, they have been very limited – one or two for a few pipelayers, plus remotely operated vehicles and other more specialised vessels, but many PSVs, especially the smaller ones, are now laid up in Guanabara Bay or hanging around hoping for spot contracts.”
The experienced maritime consultant, who used to work for the Department of Merchant Marine (DMM), a branch of the FMM, said much of his work these days is taken up “helping companies with the usual documentation required to operate in Brazil or helping companies to change their FF vessels to Brazilian flag or Special Brazilian Flag (REB)”.
Another source said that there was little activity at the Detroit yard in Navegantes and that Bram Offshore and CBO were not putting pressure on their two yards, Navship and Aliança plus Oceana, respectively, to complete the vessels they have on order.
Another winner from the FMM meeting is Marlin Navegação, the company that bought four small PSVs and one old AHTS vessel from Norskan Offshore three years ago, with a view to converting at least one of them into an OSRV and setting up as a new OSV operator.
The FMM is granting them R$15.13 million to convert the PSV 3000 Skandi Flamengo into an OSRV. With the backing of two private equity funds – Mantiq Investimentos and Mare Investimentos – Marlin Navegação became an Empresa Brasileira de Navegação (EBN, or Brazilian Shipping Company, allowing it to operate without using another EBN to arrange its charters with oil companies) last year and thereby hopes to pick up Petrobras contracts in the near future.
Another burning issue in the OSV industry in Brazil is what will happen to the three Norwegian OSV operators – Deep Sea Supply (DESS), Solstad and Farstad – who are merging.
One source who works closely with various foreign-owned companies in Brazil said “the Norwegian owners have been trodden into the ground in recent years. They are trying their best to hang in there in Brazil, but Petrobras has played fast and loose with the rules around charter contracts. I feel really sorry for them.”
It is understood that it is likely only one of the three chief executive officers will remain, so two out of Felipe Meira (CEO of Farstad in Brazil), Abilio Mello (CEO at DESS in Brazil) and Roberto Neves (head of Solstad’s Brazil operations) will probably be moving on.
The new entity will also have to decide which one of three offices in Rio de Janeiro they will keep. The most impressive office is undoubtedly the Farstad office in Avenida Rio Branco, and the least impressive is the Solstad Brazil HQ in the Rua Lauro Muller tower in Botafogo. DSS is located in an impressive suite of offices on Avenida República do Chile, conveniently located for business with both Petrobras top brass and also the Brazilian Economic and National Development Bank (BNDES), which provides soft loans for shipping companies prepared to invest in the Brazilian shipbuilding industry.
Solstad was one of the first foreign OSV operators to enter the Brazilian market back in 2001 – under the guidance of stalwart OSV executive Hans Ellingsen – and then left before returning again five years later when the Brazilian offshore market began to accelerate into overdrive, and there were rich pickings for a while.
Of the six Norwegian OSV operators plying their trade in Brazil, Solstad Offshore seemed to have been suffering the most over the past two years, with its Brazilian-based fleet falling from nine, as recently as 2013, down to just two at the end of last year (according to ABEAM).
Despite that, executives at Solstad, which was at the time going through a merger with Rem Offshore, was optimistic that there was still a future for them in Brazil. They were looking at buying a Brazilian company with Brazilian-flagged ships, but three of such ships at Farstad and one at DESS means they will now get EBN advantages via another route.
Lars Peder Solstad, the CEO for Solstad, told OSJ last year that, despite the difficulties, there was no plan to exit Brazil. “It is not our plan to close down our Brazil operation,” he said. “The problems in the OSV sector are the same in other places as well, so we will continue in Brazil.” Since then, he has told the Oslo Stock Exchange “A successful completion of the combination will create the largest company in the high-end global offshore supply industry with a fleet of 154 vessels.”
Farstad opened an office in Brazil in the early 2000s and has carved itself out an impressive niche operating anchor handlers. DESS came late to the Brazilian party – as it was then – back in 2012 with the launching of Brazil-built PSV 4500 Sea Brasil. John Fredriksen’s company quickly added new tonnage from the Sinopacific shipyard.