Oil and Gas

UPDATE 1-China's Shandong Kerui wins $587 mln deal for Petrobras gas unit

(Updates with background on bid process)

SAO PAULO, March 29 (Reuters) - Brazilian state-controlled oil company Petróleo Brasileiro SA signed a 1.95 billion real ($587 million) contract with China’s Shandong Kerui Petroleum Equipment Co to build a natural gas processing unit as part of a push to hire more global contractors.

The privately run Kerui Group partnered with mid-sized Brazilian engineering company Método Potencial Engenharia SA to build the plant in Itaboraí, about 50 kilometers (30 miles) east of Rio de Janeiro, according to a securities filing on Thursday.

Petrobras, as Brazil’s oil company is known, said construction will start by the end of the year. In the second half of 2020, the plant is scheduled to start processing gas extracted from highly productive oil fields in the subsalt area of the Santos Basin.

Reuters reported in August that Petrobras had tried to recruit major global players in the oil industry to build the plant, but got fewer foreign bids than expected due to contractual terms that some found too stringent.

Large Brazilian engineering firms implicated in the country’s biggest-ever corruption probe were excluded from bidding on the project, which was meant to be a model of clean contracting.

Yet global heavyweights such as Bechtel Corp, Areva SA and Thyssenkrupp AG balked at clauses letting Petrobras cancel the contract unilaterally, sources with knowledge of the matter told Reuters at the time.

$1 = 3.32 reais Additional reporting by Bruno Federowski in Brasilia Editing by Brad Haynes and David Gregorio