Subsea 7's Brazil pre-salt order backlog won't grow this year

OSLO, March 21 Thu Mar 21, 2013 1:58pm EDT

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OSLO, March 21 (Reuters) - Offshore engineer Subsea 7's order book for work on pre-salt projects - deep oil deposits off the Brazil coast - won't grow this year as it can't agree how to share the risks with state-controlled customer Petrobras.

So-called pre-salt areas off the coast of Brazil are home to vast, potentially lucrative oil reserves, and get their name because they are buried far below thick layers of rock and salt under the sea bed.

But Oslo-listed Subsea 7 said it was difficult to operate in the South American country, which is rushing to tap its vast new oil wealth while also building an oil services and shipbuilding industry from scratch.

"Working in Brazil is difficult because of administrative constraints, difficulties to move from one state and the other with equipment," chief executive Jean Cahuzac said.

The company is "not at the point where we will find an acceptable risk profile with Petrobras in 2013," he told Reuters on the sidelines of a conference.

"There are some risks that you cannot really price ... you have to make sure that the contract risk profile is balanced and we believe that Petrobras will have to review the risk profile in their approach for these projects."

He added, however, that Subsea 7 had not experienced delays in payments from Petrobas.

The company is in talks with Petrobras to renew contracts for four of Subsea 7's flexible pipelay support vessels (PLSVs) which expire in 2013, and Petrobras has tendered for newbuild PLSVs, with a contract expected to be awarded later this year.

PLSVs are used to help construct the subsea infrastructure needed to connect offshore platforms with refineries onshore.

Cahuzac said the risk profile for supplying those vehicles was right and he believed Petrobras would commit to seven new PLSVs, but no more than three from any individual supplier.

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