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Van Oord, Boskalis Joint Venture Assume Dredging at Brazil’s Port of Santos

Joint venture was formed after former contractor EEL Infraestruturas failed to perform a contract

Van Oord’s trailing suction hopper dredge Lelystad works in the Port of Santos, Brazil. In February, the Brazilian Ministry of Transports, Ports and Civil Aviation awarded another contract to a joint venture between Van Oord and Boskalis to deepen the port’s channel and berths, looking to replace a failed contract bid from EEL Infraestruturas of Brazil. (Photo credit: Van Oord)

Van Oord’s trailing suction hopper dredge Lelystad works in the Port of Santos, Brazil. In February, the Brazilian Ministry of Transports, Ports and Civil Aviation awarded another contract to a joint venture between Van Oord and Boskalis to deepen the port’s channel and berths, looking to replace a failed contract bid from EEL Infraestruturas of Brazil. (Photo credit: Van Oord)

The Brazilian Ministry of Transports, Ports and Civil Aviation has finally signed a contract for a joint venture (JV) made up of Van Oord and Boskalis for the capital and maintenance dredging of the Port of Santos. This follows a number of setbacks, which have delayed the project for about a year. The whole process to dredge the Port of Santos, including the initial tendering to find a contractor, should last about two years.

Dredging works to deepen the Port of Santos in Brazil had stalled after the contractor’s winning bid was called into question.

Brazil’s EEL Infraestruturas won a public tendering of BRL 369 million ($117.89 million USD) to deepen the port’s entrance channels and berths. The public tendering was opened in July 2015, but EEL Infraestruturas was only able to sign a deal in April 2016.

Despite securing a contract, EEL failed to present the guarantees required by the Brazilian government in order to perform the project.

Designed to start in October 2014, dredging was expected to deepen the port’s channel and the berths’ access bays to between 15.4 and 15.7 meters (about 50.5 and 51.5 feet) over a period of three years.

At the time EEL signed the contract, the company said it would begin moving its machinery and equipment to commence dredging 40 days after it had ended the final projects for the port, which were expected to take another three months. According to the signed contract, dredging would last 17 months.

But it took a while and the project didn’t start, as EEL couldn’t prove it had a strong enough financial structure to carry out the project. It tried to present three different guarantees, all of which were rejected by the country’s Secretariat of Ports (SEP), which is now extinct.

Since the contracted capital and maintenance dredging couldn’t be performed, because of the lack of guarantees from EEL, state-owned port operator Codesp opened a separate competitive bidding in July 2016 to keep the port’s depth near 15 meters (about 49.2 feet), until the ministry in the country’s capital, Brasília, made a final decision on whether EEL was able or not to proceed with the contract.

The bid was won by Dragabras, despite the opposition of competitors DTA Engenharia, Jan de Nul, Van Oord and Metropolitana de Engenharia.

Brazil-based Dagrabras, which is part of the DEME group, offered the cheapest contract at BRL 72 million ($23 million USD), followed by Metropolitana de Engenharia, which pro-posed a BRL 72.3 million ($23.1 million USD) deal, both well below Codesp’s BRL 116.9 million ($37.3 million USD) estimate. The Codesp tender was to dredge the access channel as well as the access to the port’s berths in the sections 1, 2, 3 and 4 for a period of 12 months.

As a result of the competitive bidding, Codesp and Dragabras signed a provisional contract with a rescission clause on October 2016.

Even so, EEL still had the chance to prove it could assume the project. But it didn’t.

Until recently, dredging contracts at the massive port have been broken up into segments, all of which have rescission clauses.

More recently, in February this year, the Brazilian Ministry of Transports, Ports and Civil Aviation awarded the capital and maintenance dredging of the Port of Santos to a JV formed by Van Oord and Boskalis for a total of BRL 369 million ($117.89 million US).

Van Oord already had a contract to dredge the port’s berth areas in the sections 1, 2, 3 and 4, but the deal expired on October 15 last year.

“In the coming months studies will be done and the design of the navigation channels and berths of the port will be reviewed. Subsequent dredging operations are expected to start later this year with the deployment of various trailing suction hopper dredges (TSHDs) and a backhoe dredge,” Van Oord said.

“The dredging activities are expected to be completed in 2018,” Boskalis added.

“By expanding the port’s handling capacity, we’ll be able to diminish freight costs and expand the country’s competitiveness, bringing benefits which will certainly reach the final consumer,” said Brazilian Transports minister, Mauricio Quintella, while signing the contract in early February.

According to estimates from the Brazilian government, for each centimeter of depth the port gains, the facility expands its handling capacity by up to eight containers or 100 tons.

OVERSEEING THE DREDGING AT THE PORT OF SANTOS

The Brazilian Ministry of Transports, Ports and Civil Aviation told IDR it is responsible for “overseeing dredging services” at the Port of Santos “through technicians named by    specific ministerial orders.”

However, the agency said it should also hire a company through a tendering to provide “inspection support” to the government, in order to help it oversee dredging at the Port of Santos, given the specificities of the services to be performed and the need of “daily monitoring.”

“Besides that, supporting inspection services should collect new data (meteorological, hydrographic, oceanographic and sedimentary information), including the execution of bathymetry services during the execution of the contract, as a way to propitiate the improvement of the knowledge of the hydrodynamic patterns of both the open and confined coastal environments, the resulting changes in the dredged sections, as well as the historical (time) series (data) destined to the calibration and validation of mathematical methods and maritime simulations in use for the navigable ways,” the agency told IDR.

As for the guarantees that dredging and related services won’t delay once again, the Brazilian government said it already has “favorably positioned itself” in the sense that it will allow port operator Codesp to use all the needed efforts to ensure depths at the Port of Santos won’t decline until dredging and maintenance services don’t take place.

The Brazilian ministry told IDR that the Van de Oord, Boskalis JV still needs to elaborate on a basic and then, an executive project, for the contracted dredging services.

BENEFITS FOR BOTH THE PORT OF SANTOS AND BRAZIL

According to data from the Brazilian Ministry of Industry, Foreign Trade and Services (MDIC), the Port of Santos accounted in 2016 for nearly 30 percent of the country’s total exports, and is key for exporting Brazilian made goods, including grains, fruits, iron ore, oil and fertilizers.

In the same year, the massive port accounted for 37.4 percent of all cargos transported in all Brazilian ports.

“Considering the expressivity of the Port (of Santos) in the country’s economy, which results from both its imports and exports, as well as from its positive influence in the nation’s trade balance, all these interventions will mitigate freight cost, demurrage (damages caused by delays) and dead freight, allowing a cost reduction in the logistics chain, and then improving the competitiveness of the Brazilian products,” the Brazilian Ministry of Transports said in response to questions from IDR.

“Due to the high sedimentation rate at the Port of Santos waterway accesses, which reaches 6.6 million cubic meters (about 8.6 million cubic yards) per year, the annual loss of depth without dredging and maintenance is 131 centimeters,” the government explained.

It means that for every centimeter of depth the Port of Santos loses, it sees a handling capacity of about eight containers going away.

“That is why dredging is indispensable for the maintenance of the operational draft,” the agency said.

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