Karoon buys FPSO working offshore Brazil for $115m

Australian oil and gas player Karoon Energy has bought the Cidade de Itajaí FPSO for $115m from Altera & Ocyan, the joint venture formed by the Brazilian company Ocyan and Altera Infrastructure.

The FPSO was bought by Karoon’s wholly-owned Brazilian subsidiary Karoon Petróleo & Gás. The deal also includes approximately $8m of transaction costs.

The unit was previously owned and operated by Altera & Ocyan and leased by Karoon for work on the Aussie firm’s Baúna project in the Santos Basin off Brazil. The acquisition is subject to customary approvals and the transaction is set to close by April 30, 2025.

The unit has been operating on the Baúna project since the field came onstream in 2013. It was built in 1985 and converted to an FPSO in 2012. It has a fluid handling capacity of around 80,000 barrels of liquid per day and a storage capacity of approximately 631,000 barrels of oil.

Karoon revealed that it would contract a new contractor to operate and maintain the FPSO on its behalf, while its Brazilian subsidiary will take over the overall ownership and strategic optimisation plans for the unit.

The process of selecting a new contractor has already commenced. The selection is set to be made by mid-2025. Altera & Ocyan will continue to operate the FPSO until the new contractor is ready to take over operations and maintenance services.

The acquisition is expected to be funded from existing cash on hand, subject to the timing of closing and near term cashflow. A deposit of $30m has been paid into an escrow account and the balance is payable on closing.

“The purchase is economically attractive, generating significant value for shareholders with an expected rate of return comfortably above our mid-teens post-tax hurdle rate and potentially more than 20%. Most importantly, it provides certainty on the availability of the FPSO for the Baúna Project through to the end of field life,” said Julian Fowles, Karoon’s CEO and managing director.

The acquisition of the FPSO is also expected to result in approximately a $4-6/bbl net unit operating cost reduction. The savings are anticipated to be realised from 2026 onwards.

The expected decrease in operating costs and certainty of the long-term availability of the vessel should allow the field to operate profitably well into the 2030s. According to the company, this will enable access to a portion of the 8.7 – 16.4mbbl of Baúna’s contingent resource (1C to 3C), subject to further technical and commercial evaluation.