25781 - QGOG Rigs

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Summary of Proposed Investment

Project Number

25781

Company Name

Eiffel Ridge Group C.V.

Date SPI Disclosed

Mar 12, 2007

Country

Brazil

Industry

Metals and Mining

Projected Board Date

Apr 12, 2007

Status

Completed

Sector

Oilfield Services

Department

Gbl Infrastructure & Natural Resources

Environmental Category

B - Limited

Previous Events

Approved : Jun 27, 2007
Signed : Jul 30, 2007
Invested : Sep 26, 2007

Project Description

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.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
Equity

Development Impact

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.

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.

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.

Contacts

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
E-mail: guilherme@qgp.com.br
www.qgp.com.br

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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. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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