Floating production systems

MODEC May Appeal Petrobras Bidding Suspension

The Japanese contractor received word in early April it would be temporarily banned from new competitive bidding.

Cadade Rio de Janiero FPSO
FPSO Cadade do Rio de Janiero MV14 was cited by Petrobras in MODEC's suspension notice.

MODEC may elect to appeal a decision laid down by Brazilian state oil company Petrobras that makes the contractor ineligible to bid on new work tenders for 13 months. The contractor received notification from Petrobras of the suspension, which cited the main basis for the sanction being losses to Petrobras caused by the performance of a trio of FPSOs under charter services that MODEC provided in the past or is presently providing the operator. The suspension period began 31 March 2021.

The FPSOs are the FPSO Cidade do Rio de Janeiro MV14, whose charter contract expired in 2019, and two FPSOs which are currently chartered to Petrobras, the FPSO Cidade de Niterói MV18 and the FPSO Cidade de Santos MV20, according to the notification.

In 2019, MODEC found cracks at the hull of the FPSO Cidade do Rio de Janeiro MV14 while the unit was on location for Petrobras at the Espadarte field in the Campos Basin. The cracks resulted in an oil spill of less than 10 cubic meters, as reported by MODEC. The FPSO had not been actively producing oil from the field since July 2018 and was in the process of being decommissioned and scheduled for departure. The FPSO was towed from the area in February 2020.

MODEC said there is no expectation of further developments or implications, including on its financials, as the administrative sanction does not impact the execution of the current contracts in place between MODEC and Petrobras. MODEC said in a statement that it remains committed to improving its practices, in order to eliminate any issues in its activities under the current contracts and that it continues to see Brazil as its main and most promising market.

One day after the announcement of the Petrobras suspension, MODEC revealed its President and Chief Executive Yuji Kozai would be replaced by MODEC director Takeshi Kanamori. MODEC said Kozai had offered to resign from the office “for reasons of ill health.”