FPSO Financing Workshop

1. Introductions / Course Overview / Review of Participant Objectives

2. Floating Production, Storage & Offloading Vessels – Techno-Economic Overview

What are FPSOs for?;

Component parts;

Operating “envelope”;

Crewing issues;

Flagging considerations;

Construction matters; and

Current state of the FPSO market.

3. The Reserve Dimension

Lenders’ exposure to reserve risk;

Lenders appetite for / attitude to reserve-based risk;

Reserves – the technical “bare bones” for lenders and borrowers:

o Reserve formation, migration and trapping;

o Hydrocarbon prospecting & exploration by seismic and drilling;

o Reserve estimation techniques – and their limitations! and

o P90/P50/P10; 1P / 2P /3P.

4. Potential Sources of Finance:

Balance sheet or cashflow-based?

Commercial banks – their approach, current appetite and capacity;

Export credit agencies - their approach, current appetite and capacity;

Bond markets - their approach, current appetite and capacity; and

Multilateral agencies and development banks - their approach, current appetite

and capacity.

5. Financing an FPSO against Field Cashflow:

Key risk issues:

o Sponsors;

o Country / political;

o Construction;

o Reserves / production;

o Offtake / charter;

o Operation & maintenance;

o Redeployment;

o Environmental / social; and

o Permits / approvals.

Likely debt structures:

o Potential providers;

o Maturity / gearing levels;

o Pricing;

o Covenants & controls;

o Events of default;

o Intercreditor issues; and

o The “hot buttons” – factors affecting IRR / NPV and sponsor / borrower

flexibility.

6. Case Study - FPSO Cidade de Campina Grande (Brazil)

Part 1 – Qualitative Risk Analysis

The participants review a briefing paper on the project, which is a $41.3 billion

sub-salt development offshore Brazil. They are required to comment on its

“bankability”, highlighting:

o issues which will enhance bankability on a project basis;

o challenging risks which will militate against bankability – at least at a

high gearing level; and

o areas where lenders are likely to focus their due diligence efforts.

Part 2 – Quantitative Risk Analysis

The trainees review a set of economic sensitivities, and are required to comment

on:

o what they indicate in terms of the key areas of cashflow vulnerability;

and

o how these factors are likely to influence the ultimate debt package.

Part 3 – Term sheet Review

The group reviews a financing offer made by a bank, which assumes ECA support.

The participants are required to mark up the term sheet ahead of a discussion

with the bank, which is seeking to be appointed Mandated Lead Arranger for the

transaction.

7. Review of Workshop / Q&A / Completion of Evaluation Forms.

FPSO Cidade de Campina Grande

FPSO Cidade de

Campina

Grande SA

50% 20% 30%

BM-S-23

Consortium

Petrobras

(Operator) 45%

BG Group 30%

Repsol 25%

20 Year Charter

Operating Agreement

Bank

Group $1.05 billion

Limited-Recourse

Loan

1. FPSO will: • operate on the Socrates field in block BM-S-23 in t he Santos basin at

approximately 300 kilometres offshore and 2,140 metres water depth; • Incorporate:

• topside facilities to process 150,000 bpd of production fluids,

• associated gas treatment for 6,000,000 Sm3/d wit h compression and carbon dioxide removal, hydrogen sulphide removal,

• water inject ion facility for 180,000 bpd. 2. Total Construct ion Cost = $1.313 bil lion.

3. Construct ion period = 28 months. 4. Yard = Brasa (at Niteroi near Rio de Janeiro)