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Summary of Proposed Investment
This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.
Date SPI disclosed
March 12, 2007
Projected board date
April 12, 2007
Invested: September 26, 2007
Signed: July 30, 2007
Approved: June 27, 2007
View Environmental & Social Review Summary (ESRS),
The project is to build and operate two dynamically positioned semi-submersible offshore drilling rigs capable of working in water depths of up to 2,000 m and 2,400 m, respectively, under charter and service contracts executed with Petróleo Brasileiro S.A. (Petrobras) in Brazil.
Queiroz Galvão Óleo e Gás S.A. (QGOG), the oil and gas subsidiary of Queiroz Galvão S.A. (QG), will operate these rigs which will be owned by separate special purpose offshore group companies. The rigs are expected to be mobilized by 2009.
Project sponsor and major shareholders of project company
The sponsors are entities owned by the Queiroz Galvão family (Queiroz Galvão Group): QG, QGOG, and Constellation Overseas Ltd. (Constellation).
QG, a holding company of the Queiroz Galvão Group, was established in 1953 and is among the largest privately owned Brazilian conglomerates with assets and operations in construction and engineering, oil and gas, public concessions, real estate, steel, agribusiness and financial services.
QGOG, wholly-owned by QG, has operations in onshore drilling, exploration and production. It also operates two offshore drilling rigs (indirectly owned by Constellation through its subsidiaries), under service contracts with Petrobras. QGOG also has a portfolio of nine exploration and production blocks in Brazil.
Total project cost and amount and nature of IFC's investment
The total estimated project cost, including interest during the construction period, is $1,029 million. A $810.1 million debt financing for these rigs is being Lead Arranged by ING Bank N.V. IFC is considering providing an A Loan of up to $50 million for the project. The borrower(s) will be offshore entities designated by the sponsor.
IFC investment as approved by Board
50 million (USD)
IFC Investment (million USD)
* These investment figures are indicative
Location of project and description of site
The rigs are expected to be built, mobilized and placed under the contracts with Petrobras and are expected to be used by Petrobras for deepwater drilling in offshore Brazil.
QGOG already operates two shallow water semi-submersible rigs (as stated above, indirectly owned by Constellation through its subsidiaries) for Petrobras since the mid nineties. It will use its existing onshore base in Macae (southeast Brazil) to support the new rigs operations.
Anticipated development impact of the project
The project offers a strong development impact:
Development of Brazil’s Energy Sector:
This project will help develop the Brazilian energy sector through building greater operating capacity and strengthening the oil and gas support infrastructure in Brazil. While, the Country in now near self-sufficiency in oil, significant new investment is needed, as planned, to grow its oil and gas production from current levels to meet growing energy demand in the Country.
Promoting Domestic Private Sector Participation:
Consistent with the government’s objectives and those of PROMINP, “Programa de Mobilização da Indústria Nacional de Petróleo e Gás Natural”, a program coordinated by the Ministry of Mines and Energy with the participation of Petrobras, and other national and industry organizations, that seeks to enhance local participation, skills and industry capacity to support the development of the hydrocarbons sector, this project will promote domestic private sector participation in the oil and gas industry. The local services sector that is being developed can be expected to grow into an internationally competitive one, able to provide competitive services for both Petrobras and other business – within Brazil and beyond
Generating Local Linkage Benefits:
Significant domestic expenditures during operations in sourcing goods and services from QGOG’s growing activities will generate increasing local linkage benefits.
Providing Local Employment, Training and Development of Local Skills:
With nearly all employment associated with Project operations comprised of Brazilian nationals, this project will provide local employment and training and help develop local skills.
Governance risks assessment
This project is targeted to provide oil field services to Petrobras and does not make substantial payments to a government. Therefore no governance risks to the identified development impacts are in evidence.
IFC's expected development contribution
Support the growth of a medium sized local company into a well equipped, competitive drilling services provider:
With its new deepwater semi-submersibles project, QGOG has moved to upgrade and build scale to its drilling and services business, significantly increasing its investments in this area. The Project represents a relatively large investment for the group, and the Sponsor has requested IFC’s continued presence and support, through financing or otherwise, to the Company’s growth into a full-scale oil and gas company and an accomplished service provider.
Contributing to sizeable financing needs:
At a time when the Brazilian market will be seeking finance for $3-4 billion of similar financing for this project and others, IFC’s participation in this financing will send a positive signal to the markets.
IFC has earlier provided support to QGOG to facilitate its entry into oil and gas exploration and production activities in Brazil, following opening up of the sector to private participation in 1997. IFC provided corporate loan facilities of $40 million in 2003 to support its early investments in this area. Simultaneously, IFC has also worked with the company in its efforts to strengthen its environmental and social management systems for managing its oil and gas activities. The proposed financing will build on IFC’s existing partnership with QGOG as it diversifies and grows its activities in Brazil’s critical energy sector.
Environmental and social issues - Category B
The project is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to the applicable performance standards, guidelines and design criteria.
IFC’s environmental and social appraisal of the project consisted of document review and sponsor interviews. Specific information about how potential environmental and social impacts will be addressed by QGOG is summarized in the Environmental and Social Review Summary (“ESRS”) for the project. An environmental health safety and social Action Plan that addresses all of the issues identified during appraisal will be implemented. This Action Plan is attached to the ESRS.
For inquiries about the project, contact:
Queiroz Galvão Óleo e Gás S.A.
Att.: Guilherme Lima
Address: Av. Presidente Antônio Carlos No. 51, 6th Floor.
City: Estado do Rio de Janeiro, RJ
Phone.: (21) 3231-2500
Fax.: (21) 2215-1739
For inquiries and comments about IFC, contact:
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
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