On 07/16 in Rio de Janeiro, Petrobras  signed two financing programs with the Japan Bank for International Cooperation - JBIC for the offer of two lines of credit amounting to US$ 1.5 billion. Mizuho Bank, Ltd. is the agent bank for these programs and the lines of credit will be 60% financed by JBIC and 40% by private Japanese financial institutions, which are insured by Nippon Export and Investment Insurance (NEXI).



The lines of credit are for Petrobras to purchase equipment and services from Japanese companies in Brazil and abroad, based on the memorandum of understanding signed in October 2012, when a strategic partnership between JBIC and Petrobras was established.



Petrobras and Japan Bank for International Cooperation has built up a close cooperative relationship over many years, with a number of joint operations already implemented. The two financing programs taken out represent vast funding possibilities for these entities, offering new ways of financing, and will further strengthen the relationship between the parties.


Milbank has advised the lenders and hedge counterparties on a further US$500 million term loan financing for Isramco Negev 2 LP (Isramco) in support of its share of the development of the Tamargas field located of the coast of Israel.  The Loan proceeds partially refinance the US$750 million bridge and term loans extended to Isramco in 2011 and also support future development and expansion of the field which became operational in March 2013.

The Tamar gas field is located off the coast of Israel and commenced operations in March 2013 after a 3 year development.  Isramco is the largest local partner in the Project and owns a 28.5% stake in the Tamar gas field.  The other investors are Noble Energy, Delek Drilling, Avner Oil and Gas and Alon Gas Exploration.  The gross resource estimate of Tamar gas field is ten trillion cubic feet (Tcf).

This financing was arranged by Deutsche Bank, who also led the 2011 financings, and Natixis and was successfully syndicated to a large number of onshore and offshore financial institutions.  Deutsche Bank has now arranged US$1.25 billion in debt financing for Isramco's share of the development of the Tamar offshore gas field since 2011.  John Dewar, a partner in Milbank's London project finance team, said, "The successful syndication of this prestigious and high-profile financing demonstrates the high level of investor confidence in the future prospects of the geopolitically important Tamar gas field."

The team was led by John Dewar and included Oliver Irwin, Vicky Cox, Matthew Mortimer, John Goldfinch and Claire Hall in Milbank’s London Project Finance, Tax and Alternative Investment practices.

Drilling activity and spend will significantly increase in global deepwater markets over the next decade according to new analysis by Wood Mackenzie. The Future of Global Deepwater Markets study indicates well spend is expected to grow from US$43 billion in 2012 to US$114 billion in 2022 challenging the industry to keep up with this unprecedented growth.  
 


Considering the deepwater sector has eclipsed that of onshore and shallow water in the last decade with respect to both discovered volumes (41 percent) and value created ($351 billion), this increase is not as surprising as previously thought. In addition, Wood Mackenzie saw a 39 percent growth in deepwater and Arctic net acreage licensed by the 20 leading deepwater players in 2012. 
 


"Deepwater has accounted for most of the discovered volumes during this time, but this has not been without increasing technical and commercial challenges," said Malcolm Forbes-Cable, Senior Management Consultant at Wood Mackenzie and author of the study. 
 


The study indicates global drilling activity returned to pre-Macondo highs in 2012 and forecasts bullish growth in deepwater, maintaining an overall compound annual growth rate of nine percent over the next decade.  Arctic drilling will also start to pick up by the end of the decade however it will only represent three percent of the wells drilled out to 2022. 
 

Wood Mackenzie believes the number of exploration, appraisal and development wells will increase by 150 percent – rising from 500 to 1,250 wells per year. 

"To meet the forecasted well demand the fleet will require 95 additional deepwater rigs to be constructed between 2016 and 2022, representing US$65 billion of investment," explained Forbes–Cable. "This will require the longest period of deepwater rig construction to date, representing a change for the deepwater sector from cyclical to sustained growth." 
 


Existing rig orders and new-builds required to meet demand suggest that the rig contractors will need an additional 37,000 workers over the next decade to operate the fleet. According to Wood Mackenzie, this simply cannot be met with existing personnel and the historical rate of recruitment.
 


This tightness in the deepwater rig market has been driven by an accelerated shift to newbuild rigs by operators in the wake of Macondo, which has set in motion increased regulation and heightened the focus on risk mitigation by the operators. 
 


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