* Petrobras loses 2.3 km pipe in offshore accident
* Sets back work in Brazil's No. 2 oilfield by about a month
* Platform delays put needed output expansion at risk
(Adds comment from source close to project paragraphs 8,9)
By Jeb Blount
RIO DE JANEIRO, April 4 Brazilian state-run oil
company Petroleo Brasileiro SA suffered a setback in
its effort to boost oil output last month when Italian
contractor Saipem SpA dropped a 2.3 km steel pipe into
the Atlantic Ocean.
On March 16, rigging failed as it was being used to wrangle
the pipe into position on a floating oil platform. The
high-grade, metal-alloy tubes plunged about 1,800 meters (5,900
feet) to the seabed, a total, crumpled loss.
The pipe itself was worth about $2 million, but the cost of
the accident will be much higher, two sources with direct
knowledge of the situation told Reuters.
By setting back efforts to expand Roncador, Brazil's No. 2
oilfield, by at least a month, Petrobras will lose tens of
millions of dollars in oil output, salaries and equipment leases
when it can least afford it.
The accident was the latest in a series of setbacks as
Petrobras has struggled to transform giant new offshore
discoveries into increased output, despite a $221 billion
five-year investment plan.
"The series of management and engineering problems the
company faces is flabbergasting," said Cleveland Jones, a
professor and researcher with Brazil's National Petroleum and
Gas Institute at the State University of Rio de Janeiro.
"This may have been an unfortunate accident, but it comes as
the company's organizational problems are becoming more
A source close to the project said on Friday the incident
had been caused by a structural failure of equipment being used
within its operational limits.
"The vessel went through inspection and some minor repair
works at port and is now moving to location to resume operations
tomorrow," the source said.
Petrobras's oil and gas production in February fell again
from a year earlier, extending more than five years of stagnant
output. This is starving the company of revenue and helping
drive up debt.
Petrobras said in February it planned to boost output in
Brazil by 6.5 to 8.5 percent to as much as 2.07 million barrels
per day (bpd) in 2014. That would be its first year-on-year gain
With production from older fields falling, delays with new
fields could put that goal at risk. Already the world's most
indebted and least profitable major oil company, Petrobras will
find it harder to finance its investment plans and pay returns
to investors without higher output.
The Brazilian government, its main shareholder, also needs
the output to help pay for a massive increase in education and
The Roncador accident will put off work until later this
month at the earliest as Petrobras and Saipem design a remedial
plan, the sources said on condition of anonymity.
Petrobras, in response to questions from Reuters, said the
accident will not affect efforts to raise output at Roncador.
New pipe will be supplied to Saipem from Petrobras's existing
stock, and connection work will restart this month, the company
added. Saipem declined to comment.
Otherwise it would take about six months to order and
manufacture a replacement. The lost pipe was to have connected
the platform to an oil pipeline on the seabed.
The P-55 "semi-submersible" platform in Roncador, designed
to produce 180,000 bpd in a field that produced 255,000 bpd in
February, was already months behind schedule when the pipe was
Had Roncador been an isolated case, Petrobras would probably
be able to shrug it off. But the P-58 and P-61 platforms in the
nearby Parque das Baleias and Papa Terra fields are also behind
In total, two of the seven production systems scheduled for
startup last year are still being connected. The P-58 began
production on March 17.
P-55 has produced some oil since the new year via a
provisional hook-up to a floating tanker, Petrobras said in a
note late Thursday.
But full production will require a connection to an undersea
oil line, which the lost pipe was supposed to provide.
Meanwhile, the P-62 production ship, which arrived in
Roncador in January, suffered a fire in a diesel electricity
generator. Brazil's labor ministry has barred the ship from
producing oil until safety issues are resolved.
The generator supplied power while workers installed
electrical, anchor and other essential systems at sea.
Those systems were not complete when the ship was unveiled
to great fanfare at a Brazilian shipyard Dec. 17 by President
Dilma Rousseff, who is eager to showcase Petrobras's offshore
engineering prowess in an election year.
"All big companies have their problems, but Petrobras has
become a creature of politics," said John Foreman, a long-time
Brazilian oil- and mining-industry executive and geologist with
J. Forman Consultoria in Rio.
"Political goals are different than engineering realities,
so communication breaks down and you get these very basic
engineering process errors."
While Petrobras has managed to complete a record number of
production vessels in recent months, several have gone to sea
without the "sub-sea" systems that control well flow and channel
the oil to the platforms, a serious problem given that leasing
and operating platforms can cost $500,000 a day or more.
"The irony is that these costly mistakes are the result of
trying to cut costs," said a senior industry official with
direct knowledge of Petrobras offshore contracts. "They forced
everybody to re-bid their jobs at lower prices, and when the
ships finally arrived, they had nothing to hook them up to."
(Additional reporting by Stephen Jewkes in Milan; Editing by
Leslie Adler and Jane Baird)