T&B 37 by Webmaster TN Petróleo

OPINION

Brazil opportunities in SURF Engineering, by Ernani Filgueiras, Downstream, Petrochemicals and Biofuels Executive Manager, Brazilian Petroleum, Gas and Biofuels Institute – IBP

OIL I GAS I BIOFUELS Platform explosion rekindles debate on operational safety Co2 demands a regulatory framework Preview: OTC 2015 will open with an award to Petrobras Year XVI • May 2015 • Issue 37 • www.tbpetroleum.com.br

SPECIAL: CRISIS IN PETROBRAS

It’s time for a

CHECKMATE Special issue SPECIAL INTERVIEW

Wagner Freire, engineer and consultant

The market must be competitive

ARTICLES

New Oil Market Paradigm the Brazilian Perspective, by José Diamantino de Almeida Dourado and Cleveland M. Jones | The enemy within - How indirect

spend management impacts profit margins, por Frank Wilhelm

contents

COMPETITIVE of onerous assignment of contracts between Petrobras and the Federal Government, which are not subject to special participation, a situation which instigated the lawsuit of the State of Rio de Janeiro in the Federal Superior Tribunal - which is still in the trial phase,” he points out. According to him, the criteria for local content, which is the object of all regulatory frameworks, needs to be revised to adapt them to market realities. “After breaking the monopoly, Petrobras showed indisputable capacity to act in an open market. It grows best in a competitive market”, he states.

WAGNER FREIRE BEGAN in Petrobras in the oil fields of Bahia, and in 1968, he headed the Geophysics Division in Brazil, promoting the beginning of extensive activity in the mapping of the Brazilian continental shelf. In the 1970s, he played a key role in the management of Risk Contracts in the E&P Division and in the presidency of BRASPETRO, the Petrobras holding company dedicated to foreign E&P activities. He later became president of Petrobras America in the United States. Freire was director of Petrobras from 1985 to 1990, when deep-water activities with major technological innovations had made great advances. Freire is concerned about the current crisis in Petrobras and its impact on industry. The crisis is serious, he points out, noting that the company must have a board of directors with less government interference. According to Freire, the return of the industry and the recovery of Petrobras will depend on the revision of the regulatory framework, which includes the re-establishment of the concession model for the pre-salt areas rather than production sharing. “As well as the review

TB Petroleum – As a former manager of Petrobras, how do you assess the current situation the company is in? Wagner Freire – The moment is extremely serious, unprecedented. There has never been anything like it over all the years of the company’s operation. It is a serious and complex crisis. But I believe that Petrobras is able to recover. It has an excellent staff with extensive experience in both domestic and international E&P, although, lately, it has been less exposed to competi-

with Wagner Freire, engineer and consultant

PETROBRAS SHOWED INDISPUTABLE CAPACITY TO ACT IN AN OPEN MARKET. IT GROWS BEST IN A COMPETITIVE

The market must be

MARKET.

What are these barriers? Firstly, regarding the company’s administration, the decisions of the Executive Board are subject to the approval of the Board of Directors – most of which are appointed by the controlling shareholder, namely the Government. Currently, seven of the ten members are appointed by the controller and only three by independent groups of shareholders. Thus, the Board often detours from good corporate governance practices and impose the decisions of the controlling shareholder. And in recent years there has been an increasing interference from the controlling shareholder, since these board members are often from the government administration, such as ministers with responsibilities in the oil industry. Now, if a company is to operate in an open market, it needs to have the autonomy to be competitive and generate operating and financial results – something that is impos-

competitive

sible when you have senior government officials acting on the board of the company. This creates a climate of insecurity and mistrust for the competitors and market investors, who believe that the government can protect or favor Petrobras to the detriment of competitors and, on the other hand, make the company cater exclusively to the interests of the government – and not the minority shareholders of the company. But isn’t that what has happened since the creation of Petrobras? Wasn’t it Petrobras that banked the Proálcool Program in the 1970s? Who inherited the priority program for thermoelectric plants in the late 1990s, as well as supported a multitude of social and cultural projects? Since the time of “oil is ours” there has been political interference. But there were significant

T&B Petroleum 37

AFTER BREAKING THE MONOPOLY,

Special interview

Wagner Freire, engineer and consultant

special interview

The market must be

Photos: T&B Petroleum

issue #37 May 2015

T&B Petroleum 37

Special: crisis in Petrobras

special: crisis in Petrobras

It’s time for a

It’s time for a checkmate

CHECKMATE

Arte sobre imagem Depositphotos

by Beatriz Cardoso and Felipe Salgado

T&B Petroleum 37 17

T&B Petroleum 37

Co2

Photos: Petrobras Agency

co 2

CO2

by Mehane Albuquerque

reater efficiency, new technologies, economy and the need to create a regulatory framework to capture, transport, storage and use carbon dioxide (CO2) from the oil and gas sector in Brazil, especially in the production of pre-salt: These are the main issues that will permeate the debates during the 3rd Edition of the Brazilian Congress on CO2. The big question is to reduce operating costs and reduce the size of facilities. The Congress will be held by the Brazilian Institute of Oil, Gas and Biofuels (IBP) at the Windsor Atlantica hotel in Copacabana, Rio de Janeiro on April 28 – 29. With the theme “Challenges and Strategies of CO2 on the Brazilian and Global Scenario”, the event brings together industry

cubic meters of gas. The numbers are from the Pre-Salt Oil S/A (PPSA). In a speech at an event of the British Chamber of Commerce and Industry last year, the president of the PPSA, Oswaldo Pedrosa, addressed the technological challenges of operating in the pre-salt and explained that the CO2 in the Libra field will be reinjected into the wells, the process called Enhanced Oil Recovery (EOR), enabling increased productivity. Before rejecting the CO2, it must be captured and separated from other gases. The cost of capture, however, is high. One of the challenges for researchers, particularly in the area of chemistry, is to make its capture economically viable via new materials and tech-

nologies absorption and adsorption of carbon dioxide. “In Brazil, there are already technologies for capture. The big question is to reduce operating costs and reduce the size of the facility,” says Raimar van den Bylaardt, Executive Manager of IBP Knowledge Management and the Congress coordinator. “The amount of CO2 in the pre-salt was lower than the projections made at the beginning. Still, we have to think of ways to mitigate and even use this gas. Reinjection is a solution, but we have to worry about the future, since water reinjection in wells in Brazil is used for the same purpose – to maintain pressure to facilitate oil output – and there are cases of wells that then end up producing more water than oil, due to the high amount reinjected. We have examples of this in Bahia. In the case of CO2, in addition to reinjection, cheaper solutions for capturing need to be found, as well as thinking about the possibilities for conversion to other products of greater economic value,” he says.

The amount of CO 2 in the pre-salt was lower than the projections made at the beginning. Still, we have to think of ways to mitigate and even use this gas.” Raimar van den Bylaardt, Executive Manager of IBP Knowledge Management

Raimar also pointed out the lesson learned from biodiesel in Brazil. At the time, the big question was: “ what to do with glycerol, the residue of production?” Many utilities have arisen afterwards, and glycerol has become a value-added product. The key for chemists focusing on the CO2 released from the pre-salt is precisely what to do with so much carbon dioxide. And above all, how to do it. Environmental Catalysis and Chemical (LACQUA), the group from the Institute of Chemistry at the Federal University of Rio de Janeiro (UFRJ), coordinated by Professor Jussara Miranda Lopes, who is vice-coordinator of the Congress, has been developing research in the area of CO2 capture and conversion. The group synthesizes new adsorbents and catalysts for CO2. The adsorbents are made of metal-organic supramolecular hybrid structures, known as MOFs (acronym for Metal Organic Frameworks), which have high adsorption capacity and selectivity for CO2.

professional profile

STONE BY STONE A native of the state of Santa Catarina, this is how Johnar Olsen refers to his successful story: “A career in life is like a castle: it is built stone by stone”, says the 47 year-old mechanical engineer. He has been in charge of Scania of Brazil, a subsidiary of an industrial group in Norway, since 2009. by Beatriz Cardoso

AFTER 20 YEARS WORKING in the oil and offshore industries, Olsen cites one of the basic rules for success, ‘learn to give up some things in order to win others’. Moreover, he points out the importance of listening: “I think one of the success formulas was to elect some people I admire as board members for my professional life. Don´t take any important professional decisions without consulting them, “ he advocates. When first meeting him, the name and the Nordic features of Johnar Olsen suggest that he is just another foreigner in a market filled with professionals from all over the world, especially when aware of his track record: in 25 years as a professional, he has been part of Norwegian corporations and institutions, as well as president of Scania. However, he is a Brazilian from the city of Lages, in the mountainous plateau in southern Santa Catarina, a place where many settlers and travelers have ended up, including one of Johnar’s ancestors, who left Norway together with a group of countrymen – in true Viking tradition – in search of gold in California in the United States. Although they crossed the Atlantic on the way to San Francisco, California (USA), they ended up in São Francisco do Sul, in the state of Santa Catarina. The vessel on which they were traveling was not able to cross the then dreaded Cape Horn, an obligatory passage to the Pacific coast. At the time, there was no the Panama Canal... ”I gave continuity to this story because my daughter was born in the United States, completing the journey of my ancestor. So she has the second name of the boat that sailed from Norway with those adventurers - Sofie,” says Johnar. Besides daughter Aislyn Sophie, he has two other children: Johann Kael and Kihan Jordan. Choice of profession – His father, an agricultural engineer, influenced the graduation of three children. “I am the eldest son of a family of engineers: my brother is a mechanical engineer and is now president of a Swiss company in Brazil. And my sister, currently living in Aberdeen, Scotland, has a PhD in chemical engineering.” Johnar remembers childhood: “fantastic, the way we lived in the countryside”. The three brothers had all the support of their devoted father and mother, something that was crucial for the young man who passed the college entrance exam at age 16 and had to leave the comfort of the family to live in a fraternity in Florianopolis. “The Federal University of Santa Catarina (UFSC) was considered at the time the Number 1 in Brazil for mechanical engineering. That was my choice, guided by my father and some cousins,” he recalls. He did not only live

T&B Petroleum 37

Co2 demands a regulatory framework

T&B Petroleum 37 37

T&B Petroleum 37

Photos: T&B Petroleum

and academia, joining forces in the search for solutions. The challenges in Brazil are many. The pre-salt deposits are located in carbon basins that are already in the extraction process that releases CO2 – and not only in burning and refining. Petrobras has made an international commitment not to emit the carbon dioxide from pre-salt oil and gas production, the percentage of which varies depending on the location of the reserve. In the Libra field of the presalt Santos Basin alone, where natural gas production could double the country’s reserves, there is currently around 400 billion cubic meters – CO2 was estimated at 44% of a total that varies between 560 and 840 billion

Photo: Keystone

demands a regulatory framework

A congress brings together academia and industry to discuss new technologies and regulation of CO2 in the oil and gas sector

26 Keeping reserves up 32 Platform explosion rekindles debate on operational safety

great productivity. In the end, everyone wanted to work in this department,” he jokes.

for this studies alone: he had a taste for sports, not unlike his fellow students. “Every weekend my brother and I spent training or competing state and national basketball championships. Besides being a great pleasure, we even received a salary as semi-professionals, “says the executive, who practices several sports. First job – inspired by the family farm, where he learned ‘valuable life lessons’, the young mechanical engineer wanted to start his career in an agricultural machinery company. He first learned a lesson during the holidays when he used to work harvesting soybeans and beans together with the brothers. “We did the bean harvest along with migrant rural workers, hired by my father for the season. When questioning him about the work, thinking that we should have some advantages because we were children of the owner, my father responded, ‘On the contrary, you should set an example by working even harder,’” he recalls. That was when the young Johnar learned to operate some agricultural machines considered by his father as the best harvesters from the New Holland brand. “I chose to work in the best company,” says Johnar, about the Brazilian branch of the centennial US company, where he worked from 1990 to 1993.” At that time, the brand belonged to Ford,” he explains. The experience gained as a production engineer contributed to his work at Dynea Industrial Engineering (Placas do Paraná), today Arauco, where he worked in the industrial division that fabricated large machines. The Norwegian group, Kvaerner, entered the life of a mechanical engineer in 1994, when he was approved in the selection process to work at what had been called Kamyr of Brazil, the equipment manufacturing company

Age: 47 years Born: Lages (SC) Married with three children Education: Mechanical Engineer (UFSC) Lives in Rio de Janeiro Sports: basketball, judo, gymnastics, indoor soccer, cycling, skydiving, motocross, skiing, wakeboarding, windsurfing, kite surfing, stand up paddle and marathons. “In recent years, I have begun training for triathlon with the goal of one day completing an Iron Man test” he says. for the pulp and paper industry, which later became a division of Kvaerner Pulping Brasfab. “In that company was my most important development, both technically and managerially,” says Johnar. He began as an industrial factory process engineer, located in the industrial center of Curitiba. ”Since I was lacking experience in managing people, I asked the industrial director to place me as head of tooling on the shop floor. This department was very troublesome and always brought challenges for the production,” says the engineer. Olsen decided to innovate: he even studied color theory and painted the whole area blue; he did away with his separate, closed office. “I wanted calmer environs because that place was a time bomb. The boss’s office (mine!) became a place of inspiration ... without walls, I had to stay close to everyone and this brought

Specialization – The achievements inspired him to take further steps. When the Getúlio Vargas Foundation created the possibility for interested parties to do an MBA outside the Rio-São Paulo circuit, he took the opportunity. With the aid of a ‘consortium of colleagues’ within the company, they got the resources to start the course, which lasted from 1997 to 1998. “It was fantastic; it gave me a vision beyond the factory floor. My biggest learning was in negotiation: I learned to negotiate with the FGV the rest of the payments for months ahead,” reveals Johnar. He recovered the investment in less than one year. At that time, when Kvaerner decided to expand its operations in Brazil, becoming also a manufacture of equipment for the oil and gas industry, he received an invitation from one of the company executives to go to Houston to do the training. “Today, this executive is part of the executive board of my professional career.” When he returned to Brazil, he was nominated for yet another training program, this time in London, Young Future Managers program. “That’s when I started to believe I had a big future ahead of me.” Once back in Curitiba, he took over management of some projects in the subsea area of Kvaerner Oilfield Products. Change of scenery – Once working in the oil and gas industry, the possibility of moving to Rio de Janeiro was imminent. “At the time, for anyone from the interior of Santa Catarina, going to live in Rio de Janeiro seemed very dangerous. “I even told a colleague I would never live in that city, not even if they doubled my salary!” But a year later, there he was. For Johnar, it was a big step in his career, but it was a very difficult for T&B Petroleum 37

Stone by stone

Events

OTC 2015 Preview

OTC 2015 WILL OPEN with an award to Petrobras

Expecting to exceed 110,000 visitors in this year’s edition, the Offshore Technology Conference (OTC), which takes place from May 4 - 7 in Houston, has Petrobras as an honored guest despite an international scenario still impacted by low oil prices. he night before the official opening of the OTC 2015 at Reliant Park in Houston (USA), Petrobras will receive the highest recognition given to a company in the offshore sector for the third time: OTC Distinguished Achievement Award, offered annually to a corporation which has been recognized on the global market for its technological innovation. With this award in hand, delivered at dinner held in the auditorium of NGR Stadium, one of the spaces of the giant Reliant Park, the Brazilian oil company starts its participation in the biggest event of the offshore sector, organized by 14 institutions, including the Brazilian Institute of Oil and Gas (IBP), the only entity that is not part of the American board of OTC. The award has been granted for the technological advances consolidated by the oil company in charge of the pre-salt development. In February, the company reached a total production of 809,200 barrels of oil equivalent per day (boe/d), of which

Exhibition area: 214,000 square feet Visitors: 108,300 Companies: 2,568 Countries: 43 44

656,800 barrels /day (bpd) and 24.2 million m³/d of natural gas. The 46th edition of OTC expects to surpass the 108,300 participants in the event held in 2014, when the crisis triggered by OPEC (Organization of Petroleum Exporting Countries) by maintaining production had not yet been implemented. The crisis dropped prices to the lowest levels in the last two decades. The organizing committee is responsible for the agenda, which includes breakfast / luncheon (29) presentations from May 4 at 7:30AM to May 7 at 5:00PM, when OTC 2015 ends. There will also be 11 panels, 4 poster sessions and 45 technical sessions during the conference, which had a total of 328 approved papers. With 696,604 ft², the fair will host 2,649 companies from 37 countries. New technologies for oil exploration and production in offshore scenarios, new frontiers (such as the Pre-salt and the Arctic), securityrelated aspects and environmental and health matters are permanent themes of the event. OTC continues highlighting the participation of women in this market, with Patricia Vega, President and CEO of GE Oil and Gas, Latin America as one of the speakers at a special event to be held on May 4th with the theme: The Next Wave, a program for the young professional - Think Globally: Your Impact as a Young Professional College students from various countries will also participate in the event, which includes in the agenda the University R & D Showcase, a program dedi-

cated to young professionals to allow them to present their research projects. Brazil has a strong presence – The opportunities of the Brazilian market will be highlighted on the second day of the event by the Executive Chairman of Barra Energia, João Carlos de Luca, who left the position of President of IBP last March. Large discoveries in the ultradeep waters of the pre-salt area of offshore Brazil, comprehensive consistent local content policy in force for more than 10 years, and Petrobras expectations to increase its current oil production from the 2.7 mb/d to 4.2 mb/d in 2020 are some of the topics João Carlos de Luca will present in the special session on May 5th, which will also have the participation of Roberto Furian Ardenghy, Deputy Consul and Head of the Trade Promotion Bureau of the Consulate General of Brazil in Houston. This year the Brazil Pavilion, organized by the IBP, received confirmation from 44 institutions and companies to participate in the event, including the return of Petrobras, which had suspended participation of its own stand two years ago and now will share space with the IBP. In addition to the Brazilian oil company, the following companies will take part of the Brazil Pavilion: Adelco, Altona, Altus, Chemtech, Claditek do Brasil, CSL, Emdoc, Estaleiro Brasa, Fechometal, Flexomarine, Forship, Gascat, Grupo IFM, Keppel Fels, Locon, MFX do Brasil, MRM, Navium, Netzsch do Brasil, Nuclep, Oceanica, Orteng, Oxifree, Poland, Powerpoxi, Prumo, Radix, Rio En-

Photo: T&B Petroleum Image Bank

by Beatriz Cardoso

genharia, Roxtec, Sandech, Softway (Thomson Reuters), Swanson – GP, Tecnofink, Uphill, Vanasa, Villares Metals, Vulkan do Brasil and WEG. There will also be stands in the Pavilion for the National Oil, Natural Gas and Biofuels Agency (ANP), the State Secretariat for Economic Development, Energy, Industry and Services (SEDEIS), the Industrial Federations of the states of Rio de Janeiro (FIRJAN) and Amazonas (FIEAM), the National Organization of Petroleum Industries (ONIP) and TN Petroleum Magazine, the only Brazilian publication with consecutive participations at the OTC for the last 15 years. Brazilians will also meet in the events organized by BRATECC - the Brazil-Texas Chamber of Commerce - with the purpose of increasing business for Brazilian companies that search for opportunities in the United States. There are also missions being organized by institutions from Brazil, such as the Brazilian Support Service to Micro and Small Enterprises (SEBRAE).

BRAZIL PAVILION Booth 1117 Exhibition area: 17,600 square feet Organizations: 2 Companies: 36 Organizations: Abenav and AGDI Participating Companies: Açoforja, Adelco, Altona, Altus, Chemtech, EBR, Emdoc, Fechometal, Ferral, Flexomarine, Forship, Gascat, Grupogp/Swanson, LFM, Keppel Fels Brasil, Laboceano, MFX do Brasil, MRM, Navium, Netzsch, Nuclep, Oceanica, Orteng, Poland, Radiomar, Radix, Rio Engenharia, Rockwell Automation, Roxtec, Sandech, STX Engemar, Superquip, T&B Petroleum Magazine, Vanasa, Vulkan do Brasil and Weg. Booth 1241 Exhibition area: 9,600 square feet Organizations: 4 Companies: 2 Organizations: ANP, FIRJAN, ONIP e OTC BRASIL 2015 Participating Companies: CSL and Oxifree T&B Petroleum 37 45

T&B Petroleum 37

OTC 2015 preview

OTC 2015 will open with an award to Petrobras

Central Avenue, today Ave. Rio Branco, a year after the inauguration of incandescent lighting installation, 1906

View taken from Corcovado, 1906 Photos: Collection Moreira Salles Institute

coffee break

Aerial view of the Praça Mauá and Ave. Rio Branco, c. 1921

View of Ilha das Cobras, downtown and Sugar Loaf, c. 1921

FIRST POSES.

Portraits of a beautiful time Of all the events planned to celebrate the 450th anniversary of the founding of Rio de Janeiro, at least one of them, given its importance and permanence, should be left as a legacy. Just such an exhibit is being shown at the Moreira Sales Institute (IMS), in Rio de Janeiro’s Gávea nieghborhood until the end of this year, bringing together 450 images of the city made between the mid-nineteenth century and early twentieth centuries. 62

by Orlando Santos

Under the title of “Rio, First Poses”, the exhibition brings together images of great masters of Brazilian photography and anonymous photographers and amateurs who built the photographic representation of Rio de Janeiro during the Second Empire and the first four decades of the Republic. The work of photographers such as Abraham-Louis Buvelot, Georges Leuzinger, Victor Frond, Augusto Stahl, Revert Henri Klumb, Albert Henschel, Marc Ferrez, Joaquim Insley Pacheco, Hubner and Amaral, Carlos Bippus, Lopes, José dos Santos Affonso, Thiele, W. Kollien, Augusto Malta and Guilherme Santos, are exhibited, all of which belong to the IMS collection and chosen from about ten thousand images from that period. Thus, the exhibition opens the IMS’s own Marc Ferrez Gallery for shows of permanent collections. Many of the images displayed have never been shown before. Along with the exhibition “A trip around Rio - The city in the wanderings of Joaquim Manuel de Macedo”, the new show will compose the IMS’s tribute to the city. Organized in six chronologically arranged environments, visitors can enjoy about 250 original photographs on the walls and windows, and three sets of images in multimedia structures: projection space in 2.20 x 9 m, two interactive maps commanded by touchscreen and dual monitor screens with 75 stereoscopic photos each, with 3D visualization. Scanned images and visualization tools with magnification offer visitors the possibility of seeing details in pictures that would not be easily seen in the original.

The first group shows the early photographic processes carried out in Rio de Janeiro, which discovered photography as daguerreotype in January 1840. The daguerreotype studio portraits had prevailed at the time. Two rooms dedicated to the period of 1850 to the 1890s, with pictures of Stahl, Leuzinger, Klumb, Frond and Ferrez reveal the memory of a cityscape and features the structured architecture of the colonial period and more intensively developed after the arrival of the Portuguese royal family in 1808. The other exhibition rooms show images documenting the changes and urban reforms promoted in the early twentieth century, particularly during the Pereira Passos administration (1902-1906), with the construction of Central Avenue, the inauguration of Beira Mar Avenue towards Gloria, Catete, Flamengo and Botafogo, and the work of the Port of Rio de Janeiro and Mangue

Canal, among others. Mostly documented by Augusto Malta, the photographer at the service of the City Hall and companies like Light, his photographs show both the city and its people during the radical transformation of the “take-down” represented by the removal of the Castle hill and later opening Central Avenue, today’s Rio Branco Avenue. Marc Ferrez, the only photographer whose work spans across two centuries, did his latest and greatest work with the Album of Central Avenue, and it is featured in one of the sections of the show. Both Ferrez and Malta put together in their work the main legacy of the picture memory of the city. The main technological advances, such as urban transport and public lighting, the automobile, early aviation, the change in the relationship of people with their own photographic image, will also be displayed, as well as the rediscovery of stereoscopic photography among amateurs and professionals, which can be seen in the work of Guilherme Santos, and portraits of city life personalities such as Pedro II, Chiquinha Gonzaga, Pixinguinha, Machado de Assis, Pereira Passos, and Ernesto Nazareth, among others. “Rio, First Poses” continue until the 1930s, when, with the end of the Old Republic, the period of modernity was inaugurated with its industrialization and urbanization that would lead the city to be what it is today. It is apparent that the images anticipated the changes that the next decades would bring, as the growth of the city towards the South Zone and beaches, which preceded the expansion toward the West Zone and Rural Zones (Barra da Tijuca, Jacarepaguá, and Santa Cruz). Images of Copacabana and Ipanema, between 1900 and 1930, reveal the first moves towards the construction of a new culture in the city, a culture associated with the ocean beaches that would come to hallmark the life of the residents of Rio during the twentieth century.

Coffee break

Leadership in Offshore Class and Related Services e-mail: absrio@eagle.org • Phone: + 55 21 2276-3535 EDITORIAL ADVISORY BOARD Affonso Vianna Junior Alexandre Castanhola Gurgel André Gustavo Garcia Goulart Antonio Ricardo Pimentel de Oliveira Bruno Musso Colin Foster David Zylbersztajn Eduardo Mezzalira Eraldo Montenegro Flávio Franceschetti Francisco Sedeño Gary A. Logsdon Geor Thomas Erhart Gilberto Israel Ivan Leão Jean-Paul Terra Prates João Carlos S. Pacheco João Luiz de Deus Fernandes José Fantine Josué Rocha

First poses. Portraits of a beautiful time

Rio: First Poses, City Visions from the starting point of Photography (1840-1930) Curator: Sergio Burgi • Exhibition: March 1 to December 31, 2015 From Tuesday to Sunday from 11am to 20h Free admission - free classification • Monitored visits to schools: book by phone +5521 3284-7400 Instituto Moreira Salles – Rua Marquês de São Vicente, 476, Gávea - RJ Phones: +5521 3284-7400 • +5521 3206-2500

T&B Petroleum 37

articles 54 New Oil Market Paradigm the Brazilian Perspective, by José Diamantino de Almeida Dourado and Cleveland M. Jones

Luiz B. Rêgo Luiz Eduardo Braga Xavier Marcelo Costa Márcio Giannini Márcio Rocha Melo Marcius Ferrari Marco Aurélio Latgé Maria das Graças Silva Mário Jorge C. dos Santos Maurício B. Figueiredo Nathan Medeiros Paulo Buarque Guimarães Roberto Alfradique V. de Macedo Roberto Fainstein Ronaldo J. Alves Ronaldo Schubert Sampaio Rubens Langer Samuel Barbosa

Year XIV • Issue 37 • May 2015 Photo: DepositPhotos with art OPINIÃO

Brazil opportunities in SURF Engineering, by Ernani Filgueiras, Downstream, Petrochemicals and Biofuels Executive Manager, Brazilian Petroleum, Gas and Biofuels Institute – IBP

OIL I GAS I BIOFUELS

62 The enemy within - How indirect spend management impacts profit margins, by Frank Wilhelm

Platform explosion rekindles debate on operational safety Co2 demands a regulatory framework Preview: OTC 2015 will open with an award to Petrobras Year XVI • May 2015 • Issue 37 • www.tbpetroleum.com.br

SPECIAL: CRISIS IN PETROBRAS

It’s time for a

sections 4 editorial 6 hot news 44 events 46 professional profile

50 company profile 64 coffee break 66 meeting 68 opinion

CHECKMATE Special issue SPECIAL INTERVIEW

Wagner Freire, engineer and consultant

The market must be competitive

ARTICLES

New Oil Market Paradigm the Brazilian Perspective, by José Diamantino de Almeida Dourado and Cleveland M. Jones | The enemy within - How indirect

spend management impacts profit margins, por Frank Wilhelm

editorial

Difficult, but possible

hat else can be said at a time like this? It’s not easy with oil at a low price and corruption at a high one. But it is possible to see a light at the end of the tunnel. As Brazilian and Petrobras reserves grow, production costs are optimized and drilling costs reduced by the use of new technologies and monitoring systems. The production of Petrobras continues to grow – more than 15% in 12 months, when comparing the volume of January and December 2014. And the reserve replacement rate is still more than 120% – the state-owned company has maintained this index above 100% for more than two decades. Divestments are expected not only here in Brazil, but throughout the world, as we will see in the cover story of this issue, which emphasizes the factors that enable the Brazilian oil and gas industry to get back on course and develop a sustainable way in a more competitive market. This is the keynote of the interview with engineer Wagner Freire, former director of Exploration & Production of Petrobras, president of BRASPETRO and Petrobras America, who is extremely concerned about the crisis in the state-owned company and its impact on the industry. “I believe that the recovery of Petrobras is in changing the regulatory framework,” says the former director, for whom the production sharing model restricts technological development, since few companies agree to participate in blocks regulated by this regime. It is also necessary to take into account the increased production of natural gas and its subsequent use, which depends on the infrastructure for outflow and distribution, which will require incentives and investment throughout the supply chain in order to consolidate the national energy matrix. This will be one of the themes of the 6th Rio Gas & Power Forum, to be held from March 24 to 26. Promoted by CWC Group, the international event has T&B Petroleum Magazine as its main media partner. A research performed by the technical consultants from DNV GL found that, due to the rapid decrease in oil prices, the confidence levels in the prospects for the oil and gas industry in 2015 fell very quickly in Brazil – 65% to 29% since October 2014. About 44 % of respondents indicate they intend to reduce Capex this year, depending on the world scenario. However, Brazil is appointed by respondents as the fourth preferred investment destination, after the United States, China and Norway. But certainly the cost control will be increased, say 79% of respondents. The fact is that Brazil continues to be an attractive market, not only for the pre-salt reserves and the potential of new frontiers, but also by showing that corruption will be fought with more vigorously, since government has not tried to prevent investigations and penalties for those involved in the illicit acts that have affected Petrobras. But there is no doubt that to maintain the investor’s interest there must be long-term planning, with a timetable for bidding on new exploration blocks, both onshore and offshore, but mainly for the pre-salt areas. This calendar is essential for companies to prepare and analyze investment opportunities in the country.

Benício Biz Executive Director of TN Petróleo

T&B Petroleum 37

Rua Buenos Aires, 2/406 Centro – CEP 20070 022 Rio de Janeiro – RJ – Brasil Phone/fax: 55 21 2224-1349 www.tbpetroleum.com.br tnpetroleo@tnpetroleo.com.br

PUBLISHER Benício Biz - beniciobiz@tnpetroleo.com.br NEW BUSINESS DIRECTOR Lia Medeiros (55 21 98241-1133) liamedeiros@tnpetroleo.com.br EDITOR Beatriz Cardoso (55 21 99617-2360) beatrizcardoso@tnpetroleo.com.br ART and CULTURE EDITOR Orlando Santos (55 21 99491-5468) REPORTER felipe Salgado (55 21 98247-8897) felipe@tnpetroleo.com.br Mehane Albuquerque (55 21 98629-8185) mehane@tnpetroleo.com.br INTERNATIONAL AFFAIRS Dagmar Brasilio (55 21 99361-2876) dagmar.brasilio@tnpetroleo.com.br GRAPHIC DESIGN Benício Biz (55 21 99194-5172) beniciobiz@tnpetroleo.com.br PRODUCTION GRAPHIC and WEBMASTER Fabiano Reis (55 21 2224 1349) webmaster-tn@tnpetroleo.com.br Laércio Lourenço (55 21 2224 1349) laercio@tnpetroleo.com.br TRANSLATION Rick Toledano (55 21 99880-9905) COMMERCIAL José Arteiro (55 21 99163-4344) josearteiro@tnpetroleo.com.br Rodrigo Matias (55 21 2224 1349) matias@tnpetroleo.com.br PRINT Walprint Gráfica DISTRIBUTION Benício Biz Editores Associados. Member of ANATEC The articles are the responsibility of the authors, not necessarily representing the opinion of the editors. T&B Petroleum is directed to engineers, geologists, technicians, researchers and buyers in the oil industry.

NAVIUM is a 100% Brazilian company, specialized in maritime installation

Modec International LLC: installation contractor for the projects FPSO Cidade do Rio de Janeiro, FSO Cidade de Macaé, FPSO Cidade de Niterói, FPSO Cidade de Santos and FPSO Cidade de Mangaratiba – mooring and risers installations procedures; logistics and materials speciﬁcations; anchors installation surveyor. Prosafe: FPSO Polvo – Mooring Masters for towing and positioning. Omni Offshore Terminals: installation contractor

Photo: Stéferson Faria/Petrobras

for the project FSO UOTE (in progress).

NAVIUM is a 100% Brazilian Offshore engineering services company, Mooring specialized in mooring design, installation, inspection and maintenance. and maritime installation Rig installation: reduce rig moves cost using our special

Quick release hook

PELIKELO

Disconnector Offshore engineering services • Rig moves: reduce rig by moves disconnector approved ABS cost – PELIKELO. using our special hook approved PELIKELOto•operate Mooring NAVIUMbyisABS also –authorized asdesign a Brazilian and installation • NAVIUMshipping is also company authorized to operate as Thea MCSBrazilian disconnector named Pelikelo by ANTAQ – The(Patent National Agency MU8502447-3) was designed to release lines under load. shipping company by ANTAQ – The National Agency of Maritime of MaritimeThis Transportation. versatile and robust tool is ideal for applications where quick, reliable and disconnect Transportation is an essential operational requirement.

Pelikelo

The tool effective operation was witnessed by the ABS, DNV and BV Classification Societies. Pelikelo is built by structural steel and designed to fit specified shackles. A ROV, auxiliary winch or a combination of both releases the tool. Some offshore applications: installation of anchors and piles, mooring lines hook up, risers and flow lines installation, manifolds deployment or any kind of structure with

11/2” Wire rope (to rig) 1/2” Wire

rope

1” Wire rope

Pelikelo

NAVIUM Engenharia, Navegação e Comércio Ltda. Av. Nilo Peçanha, 26, Grupo 904/908 • Centro CEP 20.020-100 • Rio de Janeiro • RJ • Brazil Phone: +55 21 2524-0296 navium@navium.com.br • www.navium.com.br

no water depth limit advantage.

Quick release system for drilling rigs in hazadous areas

hot news

Distinguished Achievement Awards Each year, the OTC Awards Committee considers major technological, humanitarian, environmental, and leadership contributions to the industry.

OTC Distinguished Achievement Award for Individuals – Bud DanenbergerElmer (Bud) Danenberger III will be honored for his significant contributions to offshore safety and environmental protection. Danenberger held a 38-year career with the U.S. Department of the Interior in the offshore oil and gas program. He initiated the MMS industry awards program and co-authored legislation leading to offshore renewable energy and alternate use authority. Danenberger approved and monitored the first exploratory drilling in the North Atlantic and the first California development north of Point Conception. He also authored pioneering papers on the causes and occurrence rates for OCS oil spills and blowouts, which are still widely referenced today. During his post-retirement consulting, he consulted with the National Commission on the BP Deepwater Horizon Oil Spill and was one of the principal investigators for the Blowout Risk Assessment (BORA) Joint Industry Project, among other accomplishments. OTC Distinguished Achievement Award for Companies, Organizations, and Institutions – PetrobrasThis award recognizes 8

T&B Petroleum 37

Art: Petrobras

If truly significant, the committee names an individual and an organization as recipients of the prestigious OTC Distinguished Achievement Award.

Petrobras’ pre-salt development for their successful implementation of ultra-deepwater solutions and setting new water depth records. Petrobras increased their efforts in technology development to exploit this hard-to-access resource, in waters up to 2,200 m (7,200 ft). By the end of 2014, Petrobras was producing more than 700,000 bpd of oil in the pre-salt layer of the Campos and Santos basins. The oil and gas production in this challenging environment demanded the development of different riser systems, which were successfully applied and are now available for the industry. Additionally, Petrobras achieved a significant reduction in the drilling and completion time for wells. OTC Heritage Awards – Ray Ayers, The Heritage Award is presented to Ray R. Ayers, PhD, PE, in recognition of his 50+ years in offshore research and development contributions to the

industry through joint-industry programs he formed at Shell and R&D work he performed for the Pipeline Research Council International, DeepStar, the Bureau of Safety and Environmental Enforcement, and Research Partnerships to Secure Energy for America. Early in his career, Ayers led a number of significant developments, including testing of techniques to measure and arrest buckles in offshore pipelines, and performing the first wave tank testing of oil spill clean-up on water, which formed the basis for the design of current-day booms and skimmers. He later led programs to make deepwater fiber rope mooring systems safer and more cost-effective, and he formed the DW RUPE Pipeline and HP/HT Flowline repair projects to improve environmental safety. Ayers has been awarded 49 patents and has received numerous other technical and leadership awards, including one from the American Gas Association for “Engineer of the Year.”

Royal Dutch Shell Plc’s acquisition of BG Group Plc not only increases access to deep-water fields in Brazil, but provides greater heft in dealings with Petroleo Brasileiro SA, the local partner mired in a graft probe. With Petrobras engulfed in Brazil’s largest ever corruption scandal, BG and other partners are struggling to communicate with the state-controlled producer ’s management to address delays to development plans. For BG and Galp Energia SGPS SA, relying on future Brazilian output to bolster cash flow, this uncertainty is a bigger problem than for Shell, which has a larger and more diversified portfolio. “Shell has more patience and financial strength,” Juan Ramon Fernandez Arribas, an independent analyst based in Madrid, said in an e-mail. “It can wait more to develop its projects and is a more solid operator than BG. That’s a big advantage in the discussions with Petrobras.” Shell Wednesday agreed to buy BG for about 47 billion pounds ($70 billion) in cash and shares, the oil and gas industry’s biggest deal in at least a decade. The acquisition will “provide Shell with enhanced positions in competitive new oil and gas projects, particularly in Australia LNG and Brazil deep water,” The Hague-based company said in announcing its takeover offer. BG’s Brazilian portfolio will become a key growth driver for Shell, with production set to increase to 557,000 barrels a day by 2020 from 144,000 in 2015, Jefferies analysts led by Jason Gammel wrote in a note to clients on Wednesday.

Key Driver – “Brazil is the key strategic driver,” the Jefferies analysts said. “The transaction makes Shell the leading foreign oil company in Brazil.” BG shares rose 35 percent to 1,229 pence at 12:28 p.m. in London. Shell’s shares dropped 2.3 percent to 2,045 pence. Shell also has operations in Brazil and partnerships with Petrobras, including the giant offshore Libra project. The difference is that for BG, Brazil is projected to account for a third of its production by 2020 while for Shell it’s not even 10 percent of its operations. BG has non-operating stakes in five blocks in the pre-salt area, an offshore region where Petrobras made the world’s largest discovery in at least three decades from 2006 to 2007. The blocks already account for about a sixth of BG’s output. Global Center – The largest field there is Lula, a partnership between Galp and operator Petrobras, with recoverable reserves estimated at 9 billion to 11 billion barrels. Last month, Galp’s Chief Executive Officer Manuel Ferreira de Oliveira said the company hasn’t been able to receive confirmation from Petrobras on delays to platforms for Lula. Galp said the delay could be as much as a year. BG, whose Brazilian offices are across the street from Petrobras’s offices in Rio de Janeiro, in 2013 announced that it would build its global technology center in the Brazilian city as a sign of the importance of their local operations. Shell is one of Petrobras’s four partners in Libra, a field estimated to hold almost the equivalent of Brazil’s current reserves. The five-member group agreed in 2013 to pay a $6.9 billion signing bonus for a 35-year license over the project. Petrobras owns 40 percent of the project with Shell and Total SA both owning 20 percent. China National Petroleum Corp. and Cnooc. Ltd. hold the rest..

Petrobras signs credit facility agreement with CDB

Photo: Divulgation

Photo: Petrobras Agency

Shell purchase BG for $ 69 billion

Petrobras signed (1 April) the initial credit facility agreement under a cooperation deal with China Development Bank Corporation (CDB) to be implemented during 2015 and 2016. The agreement was signed in China during a visit by Petrobras CFO, Ivan Monteiro. The agreement is between the CDB and Petrobras Global Trading BV (PGT), and covers an amount of US$ 3.5 billion. The parties also affirmed their intention to work together in the near future. This credit facility agreement is an important milestone in the ongoing partnership between CDB and Petrobras, aimed at strengthening economic synergies between the two countries. T&B Petroleum 37

hot news

Itf promotes cooperative project (JIP) in brazil Develop cooperative projects for technological innovation - the so-called JIPs (Joint Industry Projects) - in the oil and gas industry: this is the main objective of the Industry Technology Facilitator (ITF), a non-profit association, based in Aberdeen, UK, with offices in Perth (Australia) and Abu Dhabi (United Arab Emirates), bringing together 32 major operators and service providers from different countries willing to invest in research and technology solutions for problems that affect the entire industry. In 2013, the ITF launched a pilot program in Brazil and currently has two projects underway, developed by researchers from Brazilian universities. According to Arthur Braga, the institution consultant, the first project at the Federal University of Paraíba (UFPB), already approved by the ANP, is for treatment of production water. The second, for the development of multiphase meters, is about to be submitted to the ANP, and will be coordinated by researchers at the Federal Technological University of Paraná (UTFPR). Arthur Braga explains that of the 32 member companies, 18 operate in Brazil. These companies, he said, realized the need to develop new technologies for the challenges found here in Brazil, and asked the ITF to bring financial support for research centers in the country to seek solutions. Thus emerged the pilot program, the first step for the institution in Brazil, before settling officially in office in Rio de Janeiro, which is expected later this year. 10

T&B Petroleum 37

In Arthur’s opinion, the coming of the ITF happens at an extremely propitious moment, since there has been a drop in investments in research in the sector at the same time that there has been an increased demand for technology. According to Arthur, this drop in new research investment was occasioned by the crisis faced by Petrobras, a company that plays an important role in R&D of oil and gas in Brazil. “The reception by the market and the Brazilian government for the arrival of the ITF has been the best possible. An institution that brings investments to leverage new research is very welcome in a country that needs to develop cutting-edge technology, especially in light of the demands of deepwater exploration. The design of the flow meters, for example, funded for three ITF companies operating in Brazil aroused the interest of other associates that have no presence in the Brazilian market - they operate in Saudi Arabia - but they have already expressed interest in investing,“ he says. “The ITF has talked to the ANP; with CTDUT, which is already associated; with IBP, which is currently in the process of associating; and with operators and service providers in the country to establish a solid foundation for its permanent presence. As the Brazilian market for R&D for oil and gas is highly concentrated on Petrobras, and knowing that this will be a difficult year for the company in terms of investment, the coming of the ITF, motivated by other operators in the country, opens new horizons for universities and ICTS,” he adds.

On a visit to Brazil, the executive director of the ITF, Patrick O’Brien, said that this is the spirit of the work done by the institution: “Our role is to promote the integration of companies in the search for solutions to technological challenges that are common to the entire industry. Thus, we leverage investments in research, generating technological assets for the industry and for the countries where we operate.” Patrick says that since its foundation in 1999, the ITF has promoted 200 cooperative projects in different continents. “These are projects in the areas of drilling and wells, subsea, production and oil and gas facilities,” he says. According to the executive, the ITF plans their actions based on technological challenges, which are defined based on the needs identified by members and that become research lines for the scientific community to submit proposals, after having been debated internally. These proposals, in turn, are reviewed and, if approved, receive funding from the ITF member companies. In the end, the companies that invested have unlimited use of the product, but they are prohibited to commercialize it. “Intellectual property belongs to the researcher who can sell the product without restriction, including to competitors of financing companies,” explains Patrick. “Operators who finance the project have a license for unlimited use but without the right to commercial exploitation of the technology. They may use it at will, without paying anything more than the investment they made, but cannot sell to others. This is the prerogative of the researcher or a third party hired by him. In addition to generating knowledge, this could be a source of funds for universities, “says the executive.

service and quality are within your reach

International Registries, Inc.

in affiliation with the Marshall Islands Maritime & Corporate Administrators

tel: +1 713 627 9955 | houston@register-iri.com

11 www.register-iri.com

T&B Petroleum 37

special interview

The market must be

competitivE

Competition is fundamental for the consolidation of the oil industry in Brazil, because only competition can ensure the sustainable development of the market. That statement from the 83 year-old engineer from the state of Pará, Wagner Freire, is supported by his more than half a century of experience in the oil and gas sector. “Oil is an addiction,” he jokes. He joined Petrobras in 1958 and devoted 34 years to the company until his retirement in 1992 that hardly stopped him: he has been working as a consultant in the energy sector ever since. by Beatriz Cardoso Wagner Freire began in Petrobras in the oil fields of Bahia, and in 1968, he headed the Geophysics Division in Brazil, promoting the beginning of extensive activity in the mapping of the Brazilian continental shelf. In the 1970s, he played a key role in the management of Risk Contracts in the E&P Division and in the presidency of BRASPETRO, the Petrobras holding company dedicated to foreign E&P activities. He later became president of Petrobras America in the United States. Freire was director of Petrobras from 1985 to 1990, when deep-water activities with major technological innovations had made great advances. Freire is concerned about the current crisis in Petrobras and its impact on industry. The crisis is serious, he points out, noting that the company must have a board of directors with less government interference. According to Freire, the return of the industry and the recovery of Petrobras will depend on the revision of the regulatory framework, which includes the re-establishment of the concession model for the pre-salt areas rather than production sharing. “As well as the review 12

T&B Petroleum 37

of onerous assignment of contracts between Petrobras and the Federal Government, which are not subject to special participation, a situation which instigated the lawsuit of the State of Rio de Janeiro in the Federal Superior Tribunal - which is still in the trial phase,” he points out. According to him, the criteria for local content, which is the object of all regulatory frameworks, needs to be revised to adapt them to market realities. “After breaking the monopoly, Petrobras showed indisputable capacity to act in an open market. It grows best in a competitive market”, he states. TB Petroleum – As a former manager of Petrobras, how do you assess the current situation the company is in? Wagner Freire – The moment is extremely serious, unprecedented. There has never been anything like it over all the years of the company’s operation. It is a serious and complex crisis. But I believe that Petrobras is able to recover. It has an excellent staff with extensive experience in both domestic and international E&P, although, lately, it has been less exposed to competi-

tive markets than it is focused on Brazil, with many difficulties linked to the instability of the regulatory framework, as already pointed out. But the company is also subject to other barriers that need fixing. What are these barriers? Firstly, regarding the company’s administration, the decisions of the Executive Board are subject to the approval of the Board of Directors – most of which are appointed by the controlling shareholder, namely the Government. Currently, seven of the ten members are appointed by the controller and only three by independent groups of shareholders. Thus, the Board often detours from good corporate governance practices and impose the decisions of the controlling shareholder. And in recent years there has been an increasing interference from the controlling shareholder, since these board members are often from the government administration, such as ministers with responsibilities in the oil industry. Now, if a company is to operate in an open market, it needs to have the autonomy to be competitive and generate operating and financial results – something that is impos-

Photos: T&B Petroleum

Wagner Freire, engineer and consultant

After breaking the monopoly, Petrobras showed indisputable capacity to act in an open market. It grows best in a competitive market.

special interview

Since the time of “oil is ours” there has been political interference. But there were significant advances and setbacks during that interference. The discussion in Congress about the process of concessions in Brazil was very important. And there were also positive actions of the Government.

advances and setbacks during that interference. The discussion in Congress about the process of concessions in Brazil was very important. And there were also positive actions of the Government. As an example, in 1976, when the Geisel government decided to create Venture Agreements, aiming at a more rapid assessment of the petroleum potential of the country. There was great opposition by advocates of the thesis, so outdated, that “oil is ours”. The issue of competitiveness is already in daily industry worldwide. To illustrate the evolution of this concept, it is worth mentioning that the first discovery of offshore oil in Brazil occurred with Guaricema field, Sergipe, in 1968, a year before the first discoveries in Norway (Ekofisk) and the UK (Forties) both in the North Sea, where the exploratory process was extremely competitive. Result: Norway and the United Kingdom have reached long ago (1999) peak production of 9 million barrels / day. We are in 2014 and we have not reached even half of that in Brazil. 14

T&B Petroleum 37

And Proálcool? Proálcool was successful to some extent. But when the government began controlling the price of derivatives – forcing Petrobras to sell them below market prices – it not only hurt Petrobras, but the alcohol industry as well. Selling oil derivatives below market prices is a cardinal sin! Policy decisions are important, but they need to be monitored and reformed as necessary. This was the beginning of the crisis. There was another appropriate project with political support when Geisel was President: the creation of petrochemical complexes in Bahia, Rio Grande do Sul and Rio de Janeiro, which greatly contributed to the consolidation of the petrochemical industry in Brazil and to the development of states where the complexes were established. But you also speak of regulatory change as an obstacle, as another political interference. Yes. The current situation does not compare with that of the last century, because Petrobras has undergone significant changes since the breaking

of the monopoly, with the enactment of the so-called Petroleum Law in 1997, when the company started having the same treatment as the other oil operators in Brazil. I would say that this was a period of great development for Petrobras and the country. Before 2010, there were significant pre-salt discoveries in the Tupi field, Paraty, Iara, and others in the Santos Basin – factors that led the company to have a prominent position on the world stage. And this contributed much to the success of the association of Petrobras with the world’s most important players, such as ExxonMobil, Shell, Total, Equipetrol, and Galp. And has Petrobras managed to position itself as a qualified player in a competitive market? Yes. The oil industry, particularly the upstream segment (exploration and production), which generates more profits, is extremely competitive and globalized and is subject to many risks. Market risks, volatile prices and prices subject to cartels. But there is another important condition in upstream that is called explora-

The market must be competitive

tion risk: When outlining a prospect and undertaking the drilling, one can discover a large oil field or simply a dry well. This risk is so great that the companies prefer to share the risk in order to minimize it, especially in the exploration stage, which was exemplified by the activities in the North Sea, the Norwegian and British sector, and the Gulf of Mexico when the companies started to associate in joint ventures to reduce the investment risk, as well as to evaluate better the technologies and procedures in assessing the development phase in order to produce large amounts of oil faster and at lower costs. And is that not what is happening in Brazil? Not so much. As of 2010, this model has been refuted in the Brazilian market, due to changes in the regulatory framework. It is important to remember that, today, hardly a major â&#x20AC;&#x201C; to say nothing of small companies

â&#x20AC;&#x201C; would start up or acquire exploration blocks in any country without a partnership. And the main tool in the management of these associations is the Joint Operating Agreement (JOA, joint participation agreement) that has evolved over time and regulates the activities in major world markets. The Agreement is so detailed that it is hardly possible for something to occur that is not adequately covered by it. And, of course, development programs are approved by all participants of the Agreement, who also offer their contributions for the success of the project, before the plan is submitted to regulatory agencies. It was this way of working the enabled the extraordinary development of E&P in the North Sea, the Gulf of Mexico and elsewhere â&#x20AC;&#x201C; including Brazil, when the market was open to qualified companies that started to compete for areas within the concessionary regime. This is the model adopted in major produc-

ing regions, as already mentioned, as well as in developing countries. The problem is that in Brazil, due to actions taken by the Federal Government, there has been a stark departure from these practices that have been widely used around the world. That is, the creation of other schemes such as the Brazilian production sharing model and the onerous assignment contract? Exactly. Not only changes in the regulatory framework but also the elimination of other provisions such as the special participation, which is paid to the Government by concessionaires with high-production or highly productive fields. But the more serious problem was the introduction in the Brazilian sharing scheme with its single operator, which misconfigures this process. As we said before, this is an extremely competitive industry. If there is no competition, it will not go forward. How to compete

T&B Petroleum 37

special interview

when a company must be the sole operator of all available blocks in a given area, with at least a 30% share in the investments? This model has so far only been adopted for the Libra block, where there had been discoveries confirmed by the ANP, has it not? Yes, but it is in the area where Libra is located that the competition is even more necessary. We’re talking about a new frontier, with its own peculiarities that increase exploration risk due to its ever greater depths, as well as to operational and logistical aspects – if not for the fact that it is more than 300 km from the coast. Anyway, there are a number of additional difficulties, both with regard to the evaluation of reserves and to the development plan. Hence the importance of having more partnerships, more associations between companies with diverse experience: companies that will add skills in order to develop the Brazilian pre-salt. I would like to point out that the areas of pre-salt were auctioned in the second round, with the participation of many multinational companies such as Shell, ExxonMobil, Total, Partex, Equipetrol, Galp, among others. In the disputed areas, it was the combined forces of these players to explore and to drill that made the discoveries possible. Otherwise, we might not have advanced in the pre-salt. Not to mention other regions – of turbidites – outside the pre-salt, where this competition eventually resulted in new discoveries, as in the deep waters of the Sergipe-Alagoas Basin. Again, this is the result of a competition scenario. We therefore advocate that the work in partnership with other companies is crucial for Petrobras to come out of this crisis. And is the local content requirement also an obstacle? Must it be rethought, despite having posi-

tioned Petrobras as the main agent of industrial development in this production chain? Again I reiterate that, in the competitive market, as in the UK, there is a huge chain of suppliers of goods and services. But companies can buy wherever they find the best market prices, delivery times and technical specifications. That is, if South Korea offers better conditions than those of their local competitors, they will buy there, or China, or anywhere else where they have better value for money. An interesting fact is that when it made the first development of an oil field by Petrobras in the Gulf of Mexico, the Cascade-Chinook field, the FPSO used was not made in Brazil but in South Korea. The field came into production in 2014, three years after its discovery. There is no restriction in the US market to purchase in another market. But in Brazil, since 2010, there has been the progressive presence of Petrobras in all contracts for equipment and services. It created what economists call ‘monopsony’, when there is just a single buyer of equipment, a single contractor of services. Petrobras is now a monopsony (*). Not only in the pre-salt area but in other areas as well. It is a destructive market. Petrobras is neither a manufacturer of ships nor of drilling rigs: why then has the company to be associated with shipyards and create a company to manufacture rigs, namely Sete Brasil? This does not exist anywhere else. This monopsony of Petrobras is not good for the development of the market. The best way out is to adopt the model of competition. Petrobras does not have to support this industry: the option to buy where it is cheaper must be available, regardless of whether it be in the shipbuilding industry, oil rig manufacturing, or seismic surveying – in any segment.

This model to promote the domestic industry was poorly copied from other countries, such as Norway; yet there it worked. Early on, the Norwegian government demanded competitiveness of this industry and, as a result, there are 14 Norwegian companies to provide services operating in Brazil and worldwide, while there is no Brazilian oil services company operating abroad. Is that true? The model of Norway was reasonable competition. The Norwegian protected the domestic industry only for a short period. BRASPETRO was established in 1972, a year before Statoil. Today, Statoil has a completely different profile from Petrobras (its Board of Directors has three members appointed by the Government and seven by the minority shareholders and, furthermore, no minister!). In terms of participation, promotion of a competitive market, when it was created, the government decided that the company should participate in all bid blocks in the Norwegian sector of the North Sea. After two years, Statoil convinced the Government that it would only enter the blocks with a favorable assessment from the technical and economic point of view. Forty years later and we still haven’t learned the Norwegian lesson! Therefore, we believe that the recovery of Petrobras will come after changes in the regulatory framework. It is absurd that the Government obligate Petrobras to participate in the exploitation of all pre-salt blocks. And, by the way, Statoil has been investing in Brazil for several years, successfully producing in the Peregrino field in the Campos Basin, where the oil is relatively heavy (14ºAPI) and which led the company to great technological development in order to make its production profitable and efficient. The company continues to invest in the development of the field, to keep it at a good production level.

* Editor’s note: The monopsony has market power, influencing prices of a specific good, varying only in the quantity purchased. Profit depends on the elasticity of supply. The term was introduced by the British post-Keynesian economist Joan Robinson in 1933.

T&B Petroleum 37

The market must be competitive

In other words, the recovery of Petrobras depends not only on the company but also the very action of the Government. Or rather, the reduction of government interference or the obligation to participate in the pre-salt exploration. The Government and the National Congress should promote the necessary and fundamental changes, as it did at the time when it broke the monopoly. Actually, it is also important to change some aspects of the bidding process for the pre-salt. For example, in the concession model, whoever awards the larger bonus to the Government and pledges greater investments in exploration wins the bidding. And if you strike oil, the declaration of commerciality should be given within the given time. If production is large, the special participation should be paid, giving the Government more financial resources without having to commercialize

crude oil. This is a virtue of the concession processes. This does not occur in the same way in the pre-salt auction under the production sharing model: the winner offers the largest share of profit oil to the Government. And if the discovered field is mediocre or if there is not even any oil discovered? What will happen if you cannot pay the 40% promised the Government? That is, you agree to give the government money you do not know you’ll make. We must go back to square one, to the concession model used worldwide. For Petrobras, the way out of this critical situation can also be found in changes to the concession system. It depends on the will and interest of the Petrobras executive board, its Board of Directors and, above all, the interest of the controller, which is the Federal Government – a controller that imposes prices below those of the

market… imposing such principles! At the beginning of the opening process, the ANP had indexed the price of oil sold by the company to the Brent price, ensuring revenues from royalties at market prices. Regarding the price derivatives, since the Brazilian market is not competitive, a Joint Ministerial Ordinance from Finance and Mines and Energy has harnessed these prices to the prevailing monthly average in the US Gulf area, a very competitive market. This Ordinance expired in 2002. It is time to restore it to ensure that refineries, especially Petrobras, sell petroleum products at market prices. In Norway, the controller acts in accordance with the principles of corporate governance – it would never do otherwise with its Statoil. The reform of this market in Brazil is fundamental. The Brazilian oil industry is able to develop, but not with this model.

Engineering, IT and Automation 100% brazilian

Radix is an engineering and software company that provides technology-based services and solutions, technologically independent and highly qualiﬁed to attend to the world’s most prominent industries and corporations within the oil & gas sector. Radix combines a variety of different skill sets into one team with over 25 years of experience in the market, establishing a unique proﬁle in the international market capable of solving a myriad of technical and business challenges. Visit us at booth #1117 and #10063 to learn more about our services.

www.facebook.com/radixeng.fanpage www.radixeng.com.br

T&B Petroleum 37

special: crisis in Petrobras

Itâ&#x20AC;&#x2122;s time

check 18

T&B Petroleum 37

for a

checkmate

Arte sobre imagem Depositphotos

by Beatriz Cardoso and Felipe Salgado

T&B Petroleum 37 19

special: crisis in Petrobras

The game of interests that puts Petrobras in the spotlight, including allegations of corruption, political use and partisan disputes, shows that the Brazilian oil company has to overcome impasses if it is to maintain its position on the world oil and gas stage; it goes beyond the exploration risks and technological challenges. The rapid development of the pre-salt, which in January surpassed the mark of 824,000 barrels of oil equivalent (boe) per day – of which, 670,000 bpd of oil – assured the company the most important global offshore industry award for the third time: the OTC Distinguished Achievement Award for Companies, Organizations, and Institutions. These results, in such a complex scenario, are the result of investments made in recent years and show the technological advances that have been consolidated by the company. This achievement cannot be ignored, and neither can the company’s role in the Brazilian economy. These two aspects, together with a set of factors that covers the entire production chain of oil and gas, should guide the next move for the country to give a checkmate in this game, without losing its queen: Petrobras.

aving risk as part of its very nature, the oil and gas industry is undergoing its first major crisis in this century: due to the low energy prices (around $ 60), a maneuver from the Organization of Petroleum Exporting Countries (OPEC). The organization maintained the levels of production of its members, even in the face of global demand, in order not to lose its hegemony with the advancement of the United States with shale production. In an article published on January 21st from Davos by Reuters, the secretary general of OPEC, Abdullah al-Badri reiterated that the organization will not intervene to prevent the oil price collapse,

T&B Petroleum 37

despite the warning from major energy corporations that this cartel policy will restrict investments. “If we had cut in November we would have to cut again and again as non-OPEC would be increasing production,” OPEC Secretary General Abdullah al-Badri said in Davos, referring to the sharp increase in US production. “Everyone tells us to cut. But I want to ask you, do we produce at higher cost or lower costs? Let’s produce the lower cost oil first and then produce the higher cost,” Badri said. The price of oil, which fell below $ 50 a barrel, can derail the hydrocarbon extraction in various regions if it remains at this level, especially in new areas such as pre-salt, the Arctic, and especially

in deep waters. It will impact both unconventional onshore production in the US and offshore production, particularly in countries that have large development projects in offshore fields.

Divestment This situation has led oil companies to cut budgets worldwide, as some executives confessed at the World Economic Forum held in January in Davos. This divestment in production - a situation that can occur with Petrobras, if not well plan the cutting resources - can lead to supply shortages in the future, with a strong increase in prices. There was even talk of a $ 200 barrel within a few years.

“What we need is stability… OPEC is like the central bank for oil which must give stability to the oil prices to be able to invest in a regular way,” Descalzi told Reuters Television. “There is a natural decline of five percent a year from existing fields around the world. That means by 2030 more than half of the existing global oil production will disappear. There is an enormous amount of money that needs to be invested to get another 50 million barrels per day of new production”, warned the CEO of Total, Patrick Pouyanne. Other companies, such as British BP and the US ConocoPhillips and ExxonMobil are doing the same. Late last year Royal Dutch Shell and Chevron spoke in adjustments of more than $ 40 billion in spending. In early March, in a meeting with analysts, the president of Exxon, Rex Tillerson said it will cut investments in up to 12%, to reach a volume of resources of around $ 34 billion, and the company intends to reduce its level of capital spending in 2016 and 17. Still, there is a projection of an increase in production of around 2% by the end of the year. ExxonMobil plans to produce 4.1 million barrels of oil equivalent (boe) per day. The highest rate, a 7% increase, is expected in the production of liquid hydrocarbons, reaching 2.33 million barrels of oil per day (bpd). Thus, the US hopes to resume position lost to Petrobras, which in January surpassed Exxon by 10,000 barrels to reach 2.19 million bpd in Brazil. To maintain this position, the Brazilian state company has to increase its domestic oil production over the year by 6.4% in terms of average annual volume; the increase was up 5.3% compared to 2013. However, the Petrobras production increase was no less than 15.4% over the 12 months of 2014,

Photo: Divulgation

It’s time for a checkmate

Marine Solutions • • • • • • • • • •

Port Agency Offshore Agency Shore Side Logistics Shipyard & Dry Dock Support Crew Logistics Door to Deck Logistics Global Marine Travel Liner Husbandry Engineering Survey & Loss Adjustors

2015-2016 DIVESTMENT PLAN

US$

13.7 bn Exploration & Production in Brazil and abroad

30%

Supply

30%

Gas & Energy

40%

rising from 1.917 million bpd in January to 2.212 million bpd in December. On December 22nd, the production of oil and NGL production reached 2 million and 300,000 barrels of oil, the highest volume in four years, setting new daily record. In December, the total production of oil and natural gas in Brazil was also the largest in company history: 2.675 million boed. On average for the year, the total production of Petrobras oil and gas in Brazil increased by 6% in 2014, from 2.321 million boed in 2013 to 2.461 million boed in 2014.

ISS Offshore Solutions • Timely delivered supply chain support and project logistics • Specialised local on-the-ground support through our global proprietary network of port agents • Competence transfer to all our sites where your vessels are in operation, guaranteeing the same high standard of industry knowledge to support your business best • A proactive local presence with a global partnership capacity • HSSE compliance and ethics – to deliver the highest standards in shipping agency and logistic projects ISS Brazil operates a dedicated offshore division in Rio de Janeiro, working alongside our network of local port offices and subagents ready to support your business across the country

Inchcape Shipping Services Head Office Rua Conselheiro Saraiva 28-4 andar Rio de Janeiro Phone: +55 21 3622-5756 Email: offshore.brazil@iss-shipping.com

www.iss-shipping.com T&B Petroleum 37 21

A World of Local Expertise

special: crisis in Petrobras

THE OIL SEGMENT

Moody’s oil industry ratings

Exxon Mobil.................................Aaa Total..............................................Aa1 Chevron........................................Aa1 Royal Dutch Shell.......................Aa1 Statoil...........................................Aa2 Qatar Petroleum.........................Aa2 CNPC............................................Aa3 CNOOC.........................................Aa3 Sinopec........................................Aa3 China Petroleum and Chemical.....Aa3

Photo: T&B Petroleum

Pertamina.................................Baa3 Gazprom....................................Baa3* Rosneft......................................Baa3* Lukoil.........................................Baa3* State Oil Company of Averbajan..... Ba1 Tatneft.......................................Ba1* Bashneft....................................Ba2* Petrobras.........................Ba2* YPF............................................Caa1 Petroleros de Venezuela........Ca3 * Review for possible downgrade

Dual pressure In Brazil, the situation was exacerbated by the wave of allegations of corruption within the company, which had been triggered in the race for the presidency of the Republic, and amplified by the legal instrument of plea bargaining, whereby both the corrupted and corruptors seek to mitigate their sentences in exchange for delivering names involved in the reported scandal. Beyond revealing the practice that must be fumigated from the Brazilian public sector, the denouncements surrounding the fierce private capital resources paying bribes only reflects the power of the state company in the national economy as a whole. Just as major infrastructure projects had mobilized large corporations and encouraged the formation of cartels in the past, the emerging Brazilian oil and gas industry has attracted interest from all sides, including the shadier. 22

T&B Petroleum 37

No wonder that oil has generated wars and secular conflicts around the world. Having control of hydrocarbon reserves in a world where fossil energy still predominates is a strategic issue. So much so that made the United States has invested in the large-scale exploration of unconventional reserves, which has a faster peak production, as well as a shorter ‘productive life’, whereas the large conventional reserves that have been explored or discovered have an average life above 25 years. That is the question that should be considered while it is Petrobras that is in the eye of the hurricane. In the game of strategic geopolitical interests regarding resources, whether foreign or domestic, the next steps must be planned carefully and without any room for a the hasty move of a tower or a bishop that could put at risk the entire board, the assets of the Brazilian oil and gas industry. It is a task for Petrobras leaders – including the board – government,

politicians, business and society as a whole. And without any coupe d’etat to the right or left.

Classification The non-closure of the Petrobras balance sheet in 2014, due to the aforementioned allegations of corruption, is another obstacle in restoring confidence and attracting new investments. The state has taken some steps to address these difficult times, both financially and politically. In the wake of the oil companies, Petrobras announced the approval on January 26th, the review of its divestment plan for the biennium 2015 and 2016. “The total value of the plan is $ 13.7 billion, divided among the following divisions: Exploration & Production in Brazil and abroad (30%), Supply (30%) and Gas & Power (40%)”, released the company in a statement to investors. Up from the US$ 5 to 11 billion forecast in the 2014–2018 Business

It’s time for a checkmate

On February 6th, Petrobras’ board of directors approved the election of Aldemir Bendine as company president by a majority. It was an election that, according to the provisions of the Corporate Law and the Petrobras Articles of Incorporation, is valid until the next general meeting of shareholders – which had been held six days prior, on an exceptional basis in order to resolve other issues. As the former president and member of the board of the Bank of Brazil, Bendine, graduated from PUC-Rio in Business Administration, and has an MBA in Finance and General Training for Senior Executives. He brought someone of his personal confidence as Director of Finance and Investor Relations: former vice president of the same office of the Bank of Brazil, Ivan de Souza Monteiro. Other divisions were established according to the company staff, executive managers of their own divisions, all of whom

have more than 30 years with the company. The executive manager of Exploration and Production Corporate, Solange da Silva Guedes, assumed the directorship of Exploration and Production, replacing José Miranda Formigli Filho, who had been in the position for many years. Chemical engineer Jorge Celestino Ramos, executive manager of the Logistics Supply replaced the director José Carlos Cosenza. And the mechanical engineer Hugo Repsold Junior, former executive manager of Corporate Gas and Energy, will be the new director of the area, replacing José Alcides Santoro Martins.

Engineering, Technology and Materials was given to the Executive Manager of Engineering for Submarine Projects, Roberto Moro, as a replacement for José Antônio de Figueiredo. Thus, a technical staff has been set up under the command of financial professionals. By the time this magazine went to press, the only member of the old board to remain in office, although on leave, was José Eduardo Dutra, of the Corporate Services Division. Photo: Petrobras Agency

Under new command, Petrobras keeps technical staff

Owned by BTG Pactual, the largest investment bank in Latin America, BRAVANTE is one of the main players in the Brazilian Oil & Gas market. Operating along all Brazilian coast, BRAVANTE provides offshore support vessels (OSVs and EBN), logistics and environmental protection with readiness, efﬁcacy and quality.

Find out more about our company on:

www.bravante.com.br Offshore

Environmental Protection – Hidroclean

T&B Petroleum 37 23

Shipyard

Photo: Petrobras Agency

special: crisis in Petrobras

and Management Plan, released in February 2014, this action plan is part of a financial plan that, according to the state, “aims to reduce leverage, preserving cash and focus on priority investments, notably oil and gas production in Brazil in areas of high productivity and returns.” The oil company also said that the approved amount of US $ 13.7 billion is sensitive to market variables, such as the price of the Brent crude oil barrel, the exchange rate, and Brazilian and world economic growth, among others. “Changes in these variables may cause the company to change its disinvestment target,” states the company. Not a surprise, given also the international scenario. The divestment was announced during a turbulent period in which Moody’s, the credit rating agency, revised the rating for Petrobras’ debt in foreign currency from Baa2 to Baa3 on January 30th and from Baa3 to Ba2 on February 24th. This downgrade no longer classifies Petrobras as “investment grade” according to the agency, which stressed that it will maintain its rating under review. The revision “reflects the deepening scope of the investigation of improper payments, which Moody’s believes height24

T&B Petroleum 37

ens uncertainty about the timely delivery of audited financial statements and could lead to significant liquidity pressures,” reads the statement of the Agency. Moody’s also affirms that the Company may go through challenging times in order to reduce its debt in the coming years and may need more time than previously expected to reduce its leverage. Moody’s considers in its rating the possibility of financial support from the federal government to Petrobras, if necessary, and warns that the state’s rating may be sensitive to changes in the risk classification of the Brazilian government, increased leverage and production targets . Fitch, another rating agency, announced the review of Petrobras’ risk level from the BBB to BBB- on February 4th. With this grade, the company maintains its classification as investment grade. Fitch said that Petrobras’ risk rating continues to reflect the support of the Federal Government, its controlling shareholder, and its strategic importance to Brazil.

Two days later, the company’s board of directors approved the election of Aldemir Bendine to chair Petrobras, replacing Mary Grace Silva Foster, who resigned along with other company directors: José Formigli, E&P; José Carlos Cosenza, Supply; José Alcides Santoro Martins, Gas and Energy; and Almir Guilherme Barbassa, CFO and Investor Relations. A month earlier, the same board of directors had approved the appointment of João Adalberto Elek Junior for the position of Director of Governance, Risk and Compliance, for a term of three years. The new board, created in November last year, aims to “ensure procedural compliance and mitigate risks in the company’s activities, among them, fraud and corruption, ensuring adherence to laws, standards and regulations, both inside and outside the company.” In addition to attending executive board decisions of Petrobras, the new director must give prior approval in accordance for all matters submitted to collegiate decision.

Technology for endless possibilities.

Villares Metals is the only manufacturer of specialty alloys and special steels in Latin America operating in important segments, such as Oil & Gas, CPI, Power Gen, Aerospace and defense. Located in Brazil, it produces large products and forged parts of special grades, including Nickel-Base Alloys, Stainless Steel, Tool Steel and Engineering Steel as the result of more than 70 years of experience.

FAR BEYOND STEEL.

T&B Petroleum 37 25

fabio.ramos@villaresmetals.com.br | 55 19 3303 8944

special: crisis in Petrobras

Strategic collection is also under external audit? Petrobras hiring PricewaterhouseCoopers (PwC) in late February to provide audit services for the fiscal years 2015 and 2016 is another measure adopted by the oil company to reassure the market and investors. The same auditor did not sign the financial statements for the third quarter of 2014 due to allegations of corruption that have surfaced from the Federal Police with Operation Lava Jato. As for the results of 2014, Petrobras has reported that, according to “current clauses in loan contracts, the audited balance sheet shall be presented by the end of April.” After that date, the company will have 30 days to 60 days, “depending on the debt contract” to meet this obligation. Thus, the audited balance sheet shall be published before June. Regarding the financial statements not reviewed by independent auditors, released in January, the oil company had reported that the “methodology used was based on the statements contained in the statements of the former director of Supply, Paulo Roberto Costa,” and other three involved: Alberto Youssef, Gerin Julio de Almeida Camargo and Augusto Ribeiro de Mendonça Neto. Fierce Gluttony – In early March, the former manager of Petrobras’ Services Division, Pedro Barusco, who later became general director of the Sete Brazil - a company created in 2011 to manage the hiring of offshore rigs - provided new evidence to the Parliamentary Inquiry Commission (CPI) of the National Congress.

T&B Petroleum 37

According to his own testimonial, he began taking bribes at his own discretion in 1997, a time under the government of former Brazilian President Fernando Henrique Cardoso. “More broadly and with other people from Petrobras, as of 2003, 2004,” added the witness, after being questioned by the rapporteur of the CPI, Luiz Sérgio (PT-SP). But he reiterated that he would not “weave greater details, as there is an ongoing investigation that gives me the right not to comment on these details.” After breaking the monopoly in 1997, and the unsuccessful attempt to change name to PetroBrax in 2000, with the idea of a possible privatization, Petrobras implemented a new strategy of expanding its activities to become competitive in a market open. In May 2004, the company approved the Petrobras Strategic Plan 2015 with estimated expenditures for future periods. According to the PN 2004-2010, which today can only be found in presentations, the forecast was $ 53.6 billion in the period 20042010, with an average annual investment of $ 6.6 billion in Brazil and $ 1.1 billion abroad. The following year (2005), investments totaled $ 7.7 billion, jumping to $ 12.4 billion in 2006 and US $ 19.9 in 2007. From then on, it was a sharp rise of investment in projects and ventures that incited the greed of suppliers, mainly contractors, who had been facing a low tide of investment in infrastructure during the Collor, Itamar Franco and Fernando Henrique Cardoso.

After having lost technical staff to the private sector, the company also saw the loyalty of management staff responsible for contracts with suppliers reduced to dust in light of the bribery scandal. Strategic data – This scenario gained unimaginable proportions over the past decade and today the investment plans that had helped the company to consolidate the international scene have leveraged a wave of corruption that threatens Petrobras in several respects, including geopolitical. The external auditor has demanded the company consult both domestic and foreign regulators of the financial market – namely the Brazilian Securities Commission (CVM) and the SEC of the United States – in order to get the most appropriate method to calculate how much of its projects under construction or in operation were overvalued as a result of corruption. The two bodies should help Petrobras to size the hole that project overpricing caused in its assets. The estimated US $ 88 billion of losses may be beyond reality. But in the process, the auditor has prerogative to access a range of information, which may go beyond accounting or financial. The fear is that strategic data on reserves and classified projects may slip through its fingers (or thumb drives) to a market that has no limits in obtaining information in order to benefit itself, as is proven by the very Operation Lava Jato.

REGISTRATION NOW OPEN! go.otcbrasil.org/regOTCBrasil

OTC BRASIL 2015 AN E VENT ORGANIZED BY IBP AND OTC

THE ATLANTIC: FROM EAST TO WEST-- - AN OCEAN OF INNOVATION 27- 29 October 2015 | Rio de Janeiro, Brazil OTC BRASIL attracts the worldâ&#x20AC;&#x2122;s foremost experts and companies to share knowledge and explore the latest offshore energy technologies!

Join Us

T&B Petroleum 37 27

special: crisis in Petrobras

Keeping reserves up The Fitch’s rating reflects Petrobras’ position in the international scenario. The Brazilian oil company not only surpassed that of giant oil production such as ExxonMobil, the company has been reaching higher positions in the ranking of Petroleum Intelligence. The ranking is based on operating levels: reserves and production of oil and natural gas, refining and production of oil derivatives.

roduced by the consultancy Energy Intelligence Group, Petroleum Intelligence Weekly ’s (PIW 2014) Top 50 in 2014 shows the rise of the Brazilian company, which occupied the 15th position in 2012 and came in in 12th place, albeit in the middle of crisis. The company had surpassed KPC of Kuwait and Pemex of Mexico within in a year. Petrobras has placed as the company with the greatest increase in the ranking during this period; it is among the top 15. It is second only to PDVSA / Petróleos de Venezuela in Latin America. PDVSA is the 5th in the ranking and holds one of the largest reserves in the world. Despite the average 6% growth in total production, Petrobras has maintained the growth of its reserves. Its total production in Brazil in the year was 839 million boe, with production up 4.9% in 2013 - which does not include the total production from Long Duration Tests (TLDs), a resource used by the company for a period of time in order to get more information about the reservoir to deploy the final development field system. The fact is that the oil produced throughout the year fell short of reserves incorporated by the company. Petrobras added more than a billion boe in 2014, ensuring 125% on the Reserves Replacement Index, according to the Society of Petroleum Engineer (SPE), and 120% according to the strict criteria of the Securities and Exchange Commission (SEC). The SEC only allows oil and gas companies to include reserves

T&B Petroleum 37

World’s 50 oil majors Company

Country

Company

Saudi Aramco

Ranking 1

Saudi Arabia

Statoil

Norway

NIOC

Iran

Pertamina

Indonesia

CNPC

China

ConocoPhilips

USA

Exxon Mobil

USA

ONGC

India

PDVSA

Venezuela

Libya NOC

Libya

Shell

Netherlands

CNOOC

China

United Kingdom

Kazmunaigas

Kazakhstan

Gazpron

Russia

PDO

Oman

Rosneft

Russia

Repsol

Spain

Chevron

USA

Ecopetrol

Colombia

Total

France

Uzbekneftegas

Uzbekistan

Petrobras

Brazil

Novatek

Russia

KPC

Kuwait

Anadarko

USA

Ranking

Country

Pemex

Mexico

Devon Energy

USA

Sonatrach

Algeria

Apache

USA

Lukoil

Ressia

United Kingdom

Adnoc

UAE

Socar

Azerbaijan

USA

Qatar

Occidental

Sinopec

China

Chesapeake

USA

Petronas

Malaysia

BHP Billiton

Australia

Inoc

Iraq

CNR

Canada

Eni

Italy

Suncor

Canada

NNPC

Nigeria

EOG

USA

EGPC

Egypt

YPF

Argentina

Surgutneftegas

Russia

OMV

Austria

that have been proven by actual production or conclusive formation tests in their reports, and that those reserves be economically and legally viable under the existing operating conditions. Regardless of the criteria, Petrobras maintained the index above 100% for the 23rd consecutive year: something that

very few oil companies in the world can boast.

More efficient production Petrobras has also obtained good results with the set of measures adopted in the last two years after the fall of production and operational efficiency in the Campos Basin, which

It’s time for a checkmate

Pre-salt production per field– total of 824,000 boe/day

Lula

Photo: Divulgation

is responsible for most of the company’s production within the country. In the presentation made by Petrobras during Barclay’s Oil and Gas Conference, held September 2-4, 2014 in New York, the performance of two operating units responsible for the area in the Campos Basin (UO-BC) and Rio (UO-Rio) were highlighted. With 34 offshore production units capable of producing around 380,000 bpd (in older fields), the UO-BC had the high efficiency ratio of 72% in early 2012 and reached 81% in 24 months. Whereas UO-Rio, which manages 17 offshore platforms producing around 800,000 bpd (the mega-fields), raised its 92% rate to 96% in the same period. The most relevant results are being obtained in areas considered mature in the Campos Basin. Of the nine largest producers in the country, according to the ANP in January, six are in the basin and five are operated by UO-Rio: Roncador (the champion), Marlim, Marlim Sul, Marlim Leste and Barracuda. And seven of the top 30 producing wells are in these fields. The company thus began the year with a total production of 2.661 million barrels of oil equivalent per day (boepd) in January, which was the same level as in December of the previous year (2.675 million boe). The total production of oil and gas operated by Petrobras in the country, including the portion of partner companies, was 2.910 million boe, the same level reached in December 2014 (2.917 million boe). Petrobras cites the Operational Efficiency Growth Program (Proef) for being responsible “for a produc-

42.9% FPSO Cidade de Paraty

Sapinhoá 21.1% Jubarte 21.1% Baleia Azul 9.7% Marlim Leste 4.8%

Baleia Franca Caratinga 3.4%

3.2%

Source: ANP – Boletim da Produção de Petróleo e Gás Natural – Jan/2015

tion to 134,900 bpd in the existing systems of operational units in Rio, the Campos Basin, Espírito Santo and Santos” in January.

Pre-salt values mature basins Part of the good performance of the Campos Basin is due to the presalt, which hit a new monthly record in January, reaching an average of 670,000 bpd, including the portion operated by partner companies, which means 0.5% higher than the record hit in December, which was 666,000 bpd. This volume, which

does not include natural gas, accounts for almost 28% of oil production operated by Petrobras in Brazil. In total, the pre-salt production reached 824,200 boe/day, of which 24 million m3/day are of natural gas. The pre-salt is adding precious barrels to the important assets in the Campos Basin, from fields such as Barracuda-Caratinga, Marlim Leste, Baleia, Baleia Azul and Jubarte, as well as invigorating older ones, such as Pampo, Trilha and Linguado. The total volume of pre-salt hydrocarbons produced today in these

T&B Petroleum 37 29

special: crisis in Petrobras

assets is approaching 300,000 boed. Equivalent to somewhere around 15% of total production in the Campos Basin, which accounts today for 71.3% of oil production in the country and 31.2% of natural gas production, of which the Santos Basin already accounts for one third of the national production.

Transfer of Rights It is also important to point out that the company’s proven reserves do not include the volumes of oil and natural gas from the six areas of onerous assignment (Florim, Franco, Sul de Guará, Entorno de Iara, Sul de Tupi, Nordeste de Tupi), for which Petrobras paid to the Federal Government US$ 23.9 billion to extract up to 5 billion boe. Adopted in 2010, during the process of the company’s capitalization, the onerous assignment was expanded in June last year by the National Energy Policy Council (CNPE). The federal government directly hired Petrobras to explore the surplus oil

in four areas: Búzios (former Franco), Entorno de Iara, Florim and Nordeste de Tupi. It was an endeavor that may guarantee to company additional reserves between 10 billion and 15 billion barrels. The surplus will be divvied in a production sharing agreement, by which the Government receives part of the profit oil, even the signed contract system for Libra. The payment of this oil should be anticipated between 2015 and 2018. This anticipation, considering the prices at the time, should amount to about 13 billion reais.

Mission accomplished The declaration of commerciality from all areas, with good quality oil reserves, between 26º and 30º API, were made by the deadline that ended on September 3, 2014. The ANP approved an extension until December 30th only for the exploration phase for the Entorno de Iara block. This fact was effectively done by Petrobras, which declared the

Petrobras saves US$ 30.8 million in well drilling A program developed by CENPES in partnership with universities monitored 71 wells and 1471 days of rig operations in 2014. Pressure While Drilling Analyzer (PWDa - developed by Petrobras and partners) helped the company reduce costs in the amount of US$ 30.8 million in 2014. This amount is the total of 35.25 rig working days have been saved by the early detection of signals that allow corrective or preventive actions. Through automated interpretation of data from different sensors in the drilling system, the program recognizes undesirable situations that can be avoided. When there is evidence of reduced drilling performance or increased risk of an unexpected halt in drilling, for example, the software

T&B Petroleum 37

detects such behavior in real time and immediately suggests preventive actions for operational teams. The Pressure While Drilling Analyzer has presents an integrated service to monitor drilling, 24 hours, at the Decision Support Centers (CSD) of Petrobras, the Tube Park in Macaé, and at the Petrobras Research Center (Cenpes ) in Rio de Janeiro. The PWDa was developed by Petrobras, with support from the State University of Campinas, the Federal Rural University of Rio de Janeiro, the Federal Technological University of Paraná and Faculdade do Centro Leste, located in the city of Serra (ES).

commerciality of Entorno de Iara (onerous assignment) along with Iara (concession BM-S-11) on December 29, 2014. The BM-S-11 Consortium is operated by Petrobras (65%) in partnership with BG E&P Brazil (25%) and Petrogal Brazil (10%). “Given the extent of the deposits between the BM-S-11 and the Entorno de Iara block, the ANP was notified in accordance with current regulation,” Petrobras stated. In the joint statement, the estimated total recoverable volumes of these fields exceed 5 billion barrels of oil equivalent (boe), confirming the high potential of accumulations. The two regimes are mixed in the three declared fields - Berbigão, Sururu and Atapu - which were subdivided: Berbigão (concession BM-S-11), North Berbigão and South Berbigão (onerous assignment); Sururu (concession BM-S11), North Sururu and South Sururu (onerous assignment), Atapu (onerous assignment) and West Atapu (concession BM-S-11).

Second phase The development of production in fields discovered in the area of Iara adds to the development of production in the Lula field (Tupi and Iracema areas), also in the BM-S-11, where ten FPSOs will be installed. With the declaration of commerciality of the Entorno da Iara, the exploratory phase of the onerous assignment of contract has ended. Now, Petrobras, ANP and government proceed with the formal process of contract review, to be carried out block by block, taking into account the technical and economic assumptions of each area. It is expected that this review will be completed this year. On September 3rd last year, Petrobras declared commerciality Guara do Sul (today, Sapinhoá), Tupi Nordeste (currently Sepia) and Florin (Itapu field), stating that the volume contracted via onerous assignment was encountered in the exploratory phase for the three ar-

It’s time for a checkmate

P-76 hull data Length: 332 m Breadth: 58 m Draught: 31 m Storage capacity: 1.4 million barrels of oil Oil processing: 150,000 barrels per day Power generation: 100 MW

Photo: T&B Petroleum

eas of 1.214 billion barrels of oil equivalent (oil plus gas). The declarations of commerciality of Franco areas, called the Búzios field and Tupi Sul, today Lula Sul, were made in December 2013. In these fields, a total volume of 0.720 billion boe (barrels of oil equivalent) has been appropriated as proved reserves in 2013. This corresponds to 23% of the contracted volume for these areas where the company has the right to extract 3.186 billion boe 3.058 billion boe of Búzios and 0.128 billion boe from Lula Sul.

Certified reserves The director general of the ANP, Magda Chambriard, estimated at the time that Franco’s oil reserves could equal or even surpass the Libra field, the auction for which was the first of the pre-salt under the production sharing regime, carried out on October 21, 2013.

“The Lula, Fr a n c o , L i b r a [fields] are very big things,” said Magda, assessing that the estimated volumes of these onerous

assignment field reserves could reach between 8 billion and 12 billion barrels. At the end of 2013, Chambriard signaled as to the possibility of the country reaching more than 120 million m3 of daily gas to the interconnected system with future productions from Lula, Franco and Libra.

T&B Petroleum 37 31

Pre-salt – Transfer of Rights of Entorno de Iara Norte de Berbigão

Norte de Sururu

Oeste de Atapu

BRSA618

Photo: Stéferson Faria, Petrobras Agency

special: crisis in Petrobras

BRSA1146

Berbigão BRSA1032

Entorno de Iara Sururu

Sul de Berbigão

Atapu

Sul de Sururu

Source: Declaração de Comercialidade Iara e Entorno de Iara Petrobras/ANP

The certifier to help in the negotiations of the onerous assignment in the report commissioned by the ANP, Gaffney, Cline & Associates (GCA), has projected that the reserves of the pre-salt Santos Basin could contain 15 billion to 20 billion barrels, in addition to 14 billion confirmed by Petrobras so far, which would indicate a total of up to 34 billion barrels. According to the report, the presalt potential is equivalent to that of major world producing basins, such as the Canadian tar sands and the Orinoco belt in Venezuela. It was the first time that reservoirs outside the Petrobras concessions were officially certified. The work of GCA pointed out reserves of 7.8 billion barrels in the area of Libra, as released this week by the government, and 5.45 billion barrels in Franco. The rest of the projected reserves (15 billion to 20 billion) would come from areas around the Tupi, Iara and Jupiter - Petrobras discoveries - besides Florim, Tupi 32

T&B Petroleum 37

Nordeste, pau Brasil, Peroba and Guara Sul.

Anticipated production Meanwhile, Petrobras does not want to waste time. Thus, on March 12, the company started the operation of the early production system in the Búzios field in the pre-salt Santos Basin. This is the first large-scale, long-term production in the area of onerous assignment. It is being done through the platform ship Dynamic Producer, linked to the well 2-ANP-1-RJS, with average production restricted to 15,000 barrels of oil per day, due to the limited usage of gas. The company intends to produce for six months with this system in order to obtain crucial information for optimizing the design of the field’s first permanent production system with the P-74 platform, which is currently in the final stage of conversion in the Inhaúma shipyard in Rio de Janeiro.

On March 11th, the same shipyard received the hull of the FPSO P-76 platform. The construction and assembly work will be completed on site, which includes the manufacturing and fitting of pipes on the deck and engine rooms, and also of the helipad and main deck fittings. The assembly and integration of the service module and commissioning (set of technical and administrative procedures that ensures the operation of equipment, systems and services, according to what was projected) will also be made. These activities will take place while the P-74 hull conversion is completed. Upon completion of the hull conversion, scheduled for the third quarter of 2015, the P-76 will be transported to the Pontal do Paraná (PR), where the of oil and gas processing plant modules will be assembled and installed, along with the integration of their systems. With the capacity to produce up to 150,000 barrels of oil and compress 7 million m3 of natural gas per day, the P-76 is one of the four platforms contracted to operate in the Búzios field. It is with this onerous assignment production that Petrobras intends to ensure the checkmate and take a step forward, once the company has been cleaned up. The country awaits this decisive move.

Created and produced by

Book your stand now

Your platform for the future

offshore oil and gas E&P • drilling • offshore contracting • maritime services offshore wind • offshore supply • offshore vessels • transport and storage

Development Agency Noord-Holland Noord

Supported by

In association with Development Agency Noord-Holland Noord

www.offshore-energy.biz

Stay in touch

@NavingoOE #OEEC

sales@offshore-energy.biz

Facebook.com/OffshoreEnergy

+31 (0)10 2092600

Offshore Energy Amsterdam

T&B Petroleum 37 33

Developmen Agency Noord-Holla Noord

special: crisis in Petrobras

Platform explosion rekindles debate on operational safety Accident on the FPSO Cidade São Mateus is the worst since 2001, when the P-36 suffered two explosions that resulted in the deaths of 11 people.

Marsh report The accident once again put operational security on the agenda, an issue that is crucial for the oil companies worldwide, as well as a research topic of the multinational insurance brokerage and risk management outfit of Marsh. 34

T&B Petroleum 37

FPSO Cidade de São Mateus Length x Breadth: 322m x 56m Year built: 1989 Oil Production: 22,000 bpd Daily production of gas: 2.25 million m³

Photo: Divulgation

hree days after assuming the presidency of Petrobras, Aldemir Bendine was faced with his first management challenge: to explain and take action on the explosion in the pump house of the FPSO Cidade de São Mateus on February 11th, leaving 9 people dead 26 wounded. The ship, chartered by Petrobras, but operated by Norwegian BW Offshore, stood 40 km from the coast of Espírito Santo in the fields of Camarupim and Camarupim Norte since 2009, producing 2.25 million m3 of natural gas and 22,000 barrels of oil per day. The National Petroleum, Gas and Biofuels Agency (ANP), which had updated the vessel’s maritime documentation in September 2014, opened an incident investigation process to identify the causes and non-compliance of the safety management system. The Navy Directorship of Ports and Coasts said the vessel was inspected on April 3, 2014 by expert naval inspectors of the Port Authority of the Espírito Santo, which had noted 12 deficiencies, however, they did not indicate any discrepancy in relation to the equipment and security systems aboard the vessel.

Last year, Marsh released its a report entitled “The 100 Larges Losses from 1974 to 2013,” in which it found that over the past 40 years, one hundred accidents in the industry have caused damage in the amount of US$34 billion. “With more emphasis on the use of new technologies and emerging markets. However, no losses highlighted in the report should be considered as irregular events. These accidents generally occurred by failures in controls and processes of the safety systems,” said Andrew George, chairman of global oil and gas practice of Marsh. According to the executive, the global oil and gas industry is becoming increasingly sophisticated in their approach to risk management. But continuous monitoring is required. “A continued risk minimization plan in the global oil and gas industry depends on a strong guard on new and grow-

Root Cause of accident: Explosion in the pump station Date: 17/02/2015 Deaths: 9 people Injured: 26 people ing threats, as well as developing strategies to prevent and mitigate its impacts,” he says.

Brazil Among the hundred losses analyzed the last four decades, Brazil is listed with two major accidents with platforms in the Campos Basin in Rio de Janeiro - in 1984 and in 2001. The first refers to the fire on the Enchova platform, the greatest tragedy in the history of the Campos Basin. One of the fiberglass-enclosed lifeboats with capacity for 50 people and weighing about 10 tons, which removed the unit’s employees, had one of its cables tangled on the support structure. This caused an irregular descent and then fell into the sea from a height of 30m. In all, 37 people died. The second accident on platforms operation was with the P-36

Photo: Divulgation

Deepwater Horizon

P-36

Falcon State

Accidents/Losses Assets x Activities

Petrochemical

34% Refinery

29%

23% 9%

Terminal and distribution

Upstream

Gas processing

in the Roncador field, when two explosions affected one of the unit’s columns. Eleven people died in the incident. Five days later, the platform sank. Two months earlier, the Roncador development system had won the highest award of the offshore sector, the OTC Distinguished Achievement Award for Companies, Organizations, and Institutions, for its advances in technologies and economy for deepwater projects in the development in the Roncador field. Fourteen years later, Roncador is the country’s largest oil producer. The two tragic Brazilian incidents are among the 20 most emblematic accidents highlighted by Marsh, of which seven were in the upstream offshore operations. Refining, petrochemical and gas processing are responsible for the other 13 highly relevant incidents. Eight accidents occurred in the United States. It was in the North Sea where the biggest accident of all time occurred in terms of costs and lives: the 226 people aboard the Piper Alpha platform in operation in the British part of the North Sea, only 59 survived. The unit operated by Occidental Petroleum Ltd. and the Texaco was in the shallow waters (144 m depth) 193 km northwest of Aberdeen, UK. However, it is true that the Deepwater Horizon accident in the Macondo field in the Gulf of Mexico in 2010 may take the lead in this ranking. The losses at the time were valued at US$ 600 million. But by the end of 2013, British Petroleum (BP), which operated the prospect where the Transocean vessel had the blowout,

Photo: Divulgation

It’s time for a checkmate

Total accumulated losses in 2013: US$ 34bn Sourcee: Marsh – The 100 Larges Losses 1974-2013 / Large property damage losses in the hydrocarbon industry

and its partners had already paid more than $ 12 billion in damages resulting from individual lawsuits, companies and government.

From upstream to downstream According to the report, of the hundred major accidents in the oil industry recorded between 1974 and 2013, the largest losses were

concentrated in the upstream activities (34%). In all, the sector had estimated financial losses of US$ 130 million. Many of these accidents occurred after 1999 due to the increase of hydrocarbon exploration in the increasingly challenging conditions of the offshore environment. Since 2011, eight losses

T&B Petroleum 37 35

Photo: T&B Petroleum

special: crisis in Petrobras

were recorded in the ranking, all belonging to the upstream industry, refining and petrochemicals. Causes include explosions, fires, floods, blowouts and offshore structures sinking. The refining industry occupies a significant portion of the ranking, 29% of accidents in the industry, while the petrochemical segment also shows high rates of property damage (23%). These activities require increasingly advanced technologies to maximize the yield of products and derivatives from each barrel of oil or cubic foot of gas. The study shows that there is a general upward tendency for accidents and losses in these activities, since their expansion projects require installation of new units to operate atmospheric vacuum distillation using high temperatures, high pressures and catalyzers. The management of aging refineries in is an issue that regulators are increasingly showing concern, requiring risk control guarantees. All over the world, obsolete refineries are increasingly needed to do ever more complex operations. 36

T&B Petroleum 37

In turn, the segments related to the distribution of oil derivatives and natural gas processing occupied a tiny portion of 5% and 9% of incidents, respectively.

Operational check After the oil spill in Guanabara Bay in 2000, Petrobras stepped up efforts to create the framework for health, environment and safety that could mitigate the risks of their operations and facilities. From 2000 to 2008, the Program for Excellence in Environmental Management and Operational Safety (Pegaso) enabled about four thousand projects. About US $ 4.2 billion was allocated to Petrobras facilities in the state of Rio de Janeiro, mainly for improving environmental management at REDUC and the Ilha D’Água Terminal, reducing residues and leakage into Guanabara Bay. At REDUC alone, the company has invested about $ 53 million in wastewater management projects and water resources. Since 2000, the company has an Environmental Defense Center in Guanabara Bay, which oper-

ates 24 hours a day to work in the event of oil spills. For the same purpose, a specialized vessel for containment and oil collection stands ready. Another highlight is the operation control of Petrobras pipelines, which are computerized, with continuous analysis of volume, flow, pressure, temperature and density of the goods. In addition, since 2004, when Petrobras implemented Vazo (oil and derivatives leak index) no leaks have been recorded in Guanabara Bay. In 2012, Petrobras instituted the “Zero Leak Plan”. By surveying all leaks occurring in its operations, the company created a working group that identified best management practices to reduce the risk of oil spill, specific to each drilling unit and production operation. There are contingency plans for oil spills in all Brazilian oil basins. In 2014, the total volume of oil spills and derivatives as a result of all activities was 63% lower than that recorded in 2013 and 85% below the alert threshold set for the year. The leak was 69.5 m³ in the year, while the alert limit is 470 m³.

WPC LEADERSHIP CONFERENCE RESPONSIBILITY COOPERATION SUSTAINABILITY 26 TO 28 MAY 2015, TROMSø, NORwAY

CONFERENCE PROGRAMME NOw AVAILABLE AT WWW.WPCLEADERSHIP.COM

TO ISTE DA R Y

The World Petroleum Council’s Premier Leadership Conference On Responsibility, Cooperation & Sustainability REGISTRATION NOW OPEN – BOOK YOUR PLACE TODAY!! Secure your place and make your travel arrangements today to join your colleagues and experience the Midnight Sun in the Norwegian Arctic.

Host Sponsors

Platinum Sponsor

Gold Sponsor

Silver Sponsor

Supported by

For more information visit

www.wpcleadership.com T&B Petroleum 37 37

Photos: Petrobras Agency

co 2

CO2

demands a regulatory framework

A congress brings together academia and industry to discuss new technologies and regulation of CO2 in the oil and gas sector by Mehane Albuquerque

T&B Petroleum 37

Photo: Keystone

co 2 The synthesis of these compounds is being optimized by the group, looking for new lower cost of materials and high reusability. The catalysts synthesized by Lacqua are various metallic structures that play the role of catalyzing the conversion of CO2 in organic products of high added value, such as methanol, hydrocarbons and dimethyl carbonate, a precursor of polycarbonate plastic.

Regulation In addition to the issues of efficiency in Carbon Capture and Storage (CCS – a term that, according to experts, encompasses the whole process of separation, capture, transport and storage of CO2) there is another issue, according to Raimar van den Bylaardt, which is more urgent: the regulation of all these activities. The theme will gain prominence in this third edition of the congress. “The IBP has taken the lead in bringing together the technical point of view with the issue of regulation at the same event. Our goal is to form a committee to meet regularly and discuss all these issues more deeply. Since it is a complex issue in environmental terms, we wish to prepare ahead. We also want to add legal professionals. The IBP has a master’s scholarship program and we are taking the discussion to students in petroleum law courses,” he says. According to Raimar, the issue involves risk and environmental responsibility. He cites the geological storage of CO2. “Who will be responsible if is there is a leak with a few decades? The government or company that stored it? And if the company that stored it no longer exists? Our concerns are the risks related to transportation and storage, but also with future liabilities. New maintenance technologies, leakage control and protection of these areas are emerging, but the issue 40

T&B Petroleum 37

of responsibility for the environmental liability needs to be well resolved. With the creation of the regulatory framework, we aim to bring more security to these processes,” he says. When considering that the risks related to CO2, corrosion is one of the most serious. According to Ivani Bott, a teacher of Science Department of Materials and Metallurgy at PUC-Rio and also vicecoordinator of the congress, the carbon dioxide corrosion process is the most common in oil and gas, and one of the oldest problems facing the industry, causing most of the flaws in oil fields since 1940. “The phenomenon is influenced by several factors among which stand the pressure of CO2, pH, temperature and the type of steel used on the premises,” she explains. The problem directly affects the transport of CO2, which is done from a stationary source through pipes, similar to natural gas pipelines. This means it will be necessary to develop more resistant tubular structures for the corrosive processes of carbon dioxide transport across large territorial extensions, and at lower costs. In Brazil, there is no such transport for CO2 systems, but Canada already has a line linking the country to the United States, the first commercial plant in the world for CO2 capture, which has been in operation since last year. During the congress, the team coordinated by Ivani at PUC will present results of the evaluation of the protective characteristics of the layers of corrosion by CO2 formed on the surface of two types of steel: the API 5L X80, used in transport of oil and gas; and the API 5CT P110, used in oil well casing and tubing.

Capture, re-injection and geological storage Although there is no consensus on the causes of climate change, most researchers believe that the

increase in anthropogenic CO2 is the villain of global warming, mainly from burning fuels (oil, gas, coal) in power generation. The CO2 emitted by natural processes, such as cell respiration, for example, is also absorbed by natural processes such as photosynthesis. Since the industrial revolution, however, there has been an exponential increase in the amount of CO2 emitted, to the point that nature cannot absorb any more, causing an imbalance. In 2013, the CO2 exceeded the dangerous mark of 400 ppm, according to the UN Convention on Climate Change (UNFCCC), which puts the world on alert. CO2 is the greenhouse gas emitted by Brazil in larger quantities than nitrous oxide (N2O) and methane (CH4). The main sources of emissions in the country, according to the Climate Observatory, are the burning of forest (biomass) and vehicle fuels, which exceed industrial emissions. However, more recently there has been an increase in emissions from power generation, due to the use of thermal power plants in prolonged drought, since the Brazilian energy matrix is based on hydropower and susceptible to drought. In order for countries to continue industrial productivity without harming their economies and the environment, it is necessary to capture and store carbon (CCS) through processes and technologies, or convert it to products of a higher aggregate value. Known CO2 capture processes are: post-combustion, precombustion, oxycombustion and chemical looping, each one having advantages and disadvantages. The post-combustion process is the most used worldwide in pilot plants currently in operation, and it is used in the only commercial plant in operation today, located in Canada. Absorption, adsorption, membranes and cryogenic distillation are the capture technologies

CO2 demands a regulatory framework researched by today’s chemists in order to optimize processes. The most commonly used capture technologies are: chemical absorption using amines, solvents and physical absorption, cryogenic distillation, which involves high costs and occupies large spaces. In this scenario, the MOFs, a new class of supramolecular polymer hybrid materials appears as a solution, prove more efficient and occupy little space, adsorbing large amounts of gas into small areas, and they are reusable. However, according to Lopes Jussara Miranda, the disadvantage of this technology is cost. Still, the MOFs outperform other substances – such as zeolites, also used in CO2 adsorption – for technical stability and selectivity. Due to the costs involved, Jussara and the UFRJ team are seeking alternatives, testing hybrid

arrays with cheaper materials. In collaboration with the Coppe membranes group, chemists are creating mixed MOFs with polymeric membranes, called MMM, with very promising results, according to the professor. In Brazil, Petrobras was one of the pioneers in EOR. Since 1988, the company has been reinjecting high-pressure gas into its wells in the Recôncavo Baiano, in order to optimize the extraction of oil and to increase the yield of mature fields already in production decline. The CO2 reinjection helps recover the fields, since only about 30% of oil contained in the rock can be removed. In the last decade Petrobras was able to increase this average from 27.7% to almost 32%. At the time, the CO2 was purchased from the former Northeast Petrochemical Company (COPENE) and reinjected into the

fields of Araçás, Rio Pojuca and Biracica. In the latter, the reinjection technique was so successful, the company managed to maintain partial production in the field for 20 years. More recently, universities and institutions have been devoted to a thorough review of capture, testing new methods, due to the expected carbon dioxide increase in the production from the pre-salt. The National Institute for Space Research (INPE), in Cachoeira Paulista, developed a demonstration of a setup project for Petrobras, using chemical looping combustion. The Federal University of Santa Catarina has been studying the absorption of CO2 via a surface free of the polyol ester oil layer in PVT cell, within a closed circuit, with good results. There is also the work of the CEPAC (Centre for Excellence in

HMSWeb Handover Management System Quality, Completions & Commissioning Management Software, the complete solution for any industrial asset: • 2,500 active users around the world • 200 projects in the Oil & Gas, Mining, Energy and Marine industries, among others • 7 countries • 300 different checksheets ready to use (methodological approach)

• 100% web-based • Mobile app, on-line and off-line options • Interface with other IT tools (SAP PM, 3D models, webservices, XML and Excel) • Simple and effective

English, Spanish and Portuguese supported. For more information please ask for a demo. www.hmsweb.com.br

T&B Petroleum 37 41

co 2

Art: Divulgation

CCS (Carbon Capture and Storage) station capture carbon dioxide (CO2) whose function is to transport and store in a deep geological formation.

Carbon Storage Research) regarding geological storage, which is connected the PUC-RS and financed by Petrobras. The Carbomethane Project injects CO2 in the coal deposit of Charqueadas, in Triunfo, in order to expel methane through a parallel well to produce heat or electricity. The injected CO2 binds chemically to coal, preventing its release into the atmosphere. “Another issue that we have to take into account is the ability to transfer the technology from laboratory to industry, where conditions are quite different from those produced on the bench,” says the researcher, who also has work in the conversion area. Several pilot plants studying CO2 capture have been installed in other countries, but in Brazil this number is greatly reduced. The Clean Coal Technology Center (CTCL), of the College of SATC in Santa Catarina, recently received R $ 3.4 million in funds from CGTEE / Eletrobrás for the synthesis of new adsorbents in CO2 capture and for purchasing of equipment for installing a pilot plant. The works will begin in the second half of this year. “The benefits go far beyond CTCL , which will gain from generating research from the most modern structure today. The funds will promote scientific development in the area of clean technologies aimed mainly for the area of thermal conversion of coal, 42

T&B Petroleum 37

but may also be applied to other sectors like oil and gas,” says the professor of the course of Chemical Engineering, researcher, and coordinator of the project, Resmini Carolina Melo. In 1996, Statoil installed a pilot plant in Norway that is a world reference: it is able to capture a megaton of CO2 per year. Mitsubishi has another in Malaysia, combining CO2 capture and production of hydrogen and urea. British Petroleum built a plant in Algeria, using amine-alcohols and huge towers for absorption and adsorption. In Korea, a pilot plant with solid adsorbents uses carbonation and is about to become commercial. And in Canada, the first commercial plant based on post-combustion, connected to a coal thermoelectric plant, captures 1 million tons of CO2 per year, the equivalent to 250,000 cars. The surplus is injected into a saline aquifer. In terms of storage around the world, besides depleted oil and gas wells, CO2 has been stored in disabled coal mines and saline aquifers. Statoil, for example, is stocking carbon in Norway in caves in the northern seabed in the fields of Sleipner Vest in the Utsira geological formation. It is estimated that it would take about 600 billion tons of CO2 to fill all the pore space of the Utsira formation. This is equivalent to all the anthropogenic production of CO2 of the last 20 years, at current rates.

In Utsira, CO2 is prevented from moving to the surface by a hermetically sealed rock layer of 800m thick. As the first commercial project of CO2 storage in a deep saline aquifer, Sleipner Vest sparked interest in the oil and gas sector, but also brought questions to scientists and environmentalists about the risks of this technology, especially for leaks. The places most currently used for geological storage are dead oil and gas wells, considered to be the most suitable although they require constant monitoring, especially when they are located in the sea at great depths. According to research, global estimates of CO2 storage capacity in oil reservoirs vary between 126 and 400 gigatons (Gton). The overall capacity of the gas storage reservoirs, in turn, is estimated at 800 Gton. That is, the total storage capacity in these wells will therefore vary between 675 and 900 Gtons. Leaks pose risks of environmental damage and there are limits in order not to exceed carbon emission rates projected by the Intergovernmental Panel on Climate Change (IPCC). Using EOR excessively or storing gas in inappropriate places present risks. Studies indicate that the leakage rates should be lower to 0.01% per annum to be acceptable in all emission scenarios projected by the IPCC. Were leakage rates to exceed 1% per year, for example, the amount of CO2 liberated would be higher than the emissions considered possible after 2100.

Conversion and use of CO2

One of the goals of the researchers is to find uses for large amounts of CO2, rather than store it. Today, according to Jussara Lopes Miranda, more than 70% of the CO2

CO2 demands a regulatory framework produced by the world oil industry is injected for EOR. It is already a mature technology, already mastered by the industry, and it is the most cost effective method, since it is cheaper to reopen a well than to open a new one. But there are other uses beginning to emerge with good future prospects. “CO2 is present in today’s food manufacturing processes; the carbonation of beverages; in the manufacturing of fertilizers, polymers, and paints; in additives to increase the octane rating of fuels; cosmetics; and it can also be processed into products such as green plastic and even aspirin [salicylic acid], “she says. According to Jussara, hydrogen is the key to the conversion of CO2. It’s possible to convert carbon dioxide to a multitude of compounds such as light hydrocarbons, alcohol, formaldehyde and formic acid, among others.

“It is also possible to hydrogenate CO2 into methanol. There is even a plant for the hydrogenation of CO2 to methanol by Mitsui, which uses hydrogen obtained electrolytically, as well as zinc and copper catalyzers,” she explains. Carbon dioxide can be still used to fertilize microalgae plantations, to produce drugs and even biodiesel, an experience that is being carried out today in the Rio Grande do Sul. Also in that state, an agreement between Eletrobrás and the University Foundation of Rio Grande (FURG) provides for the technical feasibility studies for the use of microalgae for CO2 absorption in thermoelectric generation.

Processes and capture technologies The separation of CO2 from other gases is the stage that presents the greatest technical difficulty, the researchers said,

and represents 75% of the associated costs. In order to be used for reinjection, to be compressed and transported, or for any other purpose, CO2 must have a purity percentage above 96% and may not be mixed with other gases. The technology to be used in the CO2 separation/capture will depend on the gas flows produced and the viability of implementing a plant or the adaptation of facilities already in operation, together with the assessment of the advantages and disadvantages of each method. Post-combustion is the process most used today by industries that perform CCS, because it is the most feasible in the short term, allowing for the adaptation of installations in industrial plants already built. In this scenario, the separation of CO2 occurs after burning

Developing Commissioning as an engineering concept focused on Operability • 230+ projects carried out in 160+ industrial assets and 20+ countries • 40+ offshore platforms commissioned • 100+ clients around the world • PMI Management Concepts • QHSE Excellence • Integrated Management System (ISO 9001, ISO 14001, OHSAS 18001)

Products

• Commissioning • Operation & Maintenance & Modifications • Construction & Assembly • Consultancy Services • Owner’s Engineering • Regulatory Support

For more information please visit www.forship.com.br T&B Petroleum 37 43

co 2 fuel with air and the chemical absorption is done with solvents, adsorbents and membranes, which may be inorganic (carbon, zeolite, ceramics or metal) or organic (polymer). According to Jussara, they are almost in the commercial stage for the first generation of membranes for separating methane and CO2. The disadvantage of post-combustion is the low partial pressure of CO2 in the gas stream, which leads to an increased movement of capture substances. In the pre-combustion, the fuel is gasified and converted into syn-

thesis gas by a catalyst to produce CO2 and hydrogen. The CO2 will

be compressed and dehydrated for transport, use or storage, and hydrogen can be used in boilers, furnaces, turbines, engines or fuel cells. Because of this, the pre-combustion capture is more advantageous, as Jussara has said, not only for the production of hydrogen, but for generating a gas stream rich in CO2, which reduces the cost of pressurization. However, it is difficult to incorporate in industrial plants currently in operation and the cost of construction of installations and maintenance is high. In

this capture process, physical solvents, cold methanol and membranes are used. In oxycombustion, the primary fuel combustion is made with nearly pure oxygen (95%) in place of the air, so that the resulting gas is mainly composed of water vapor and CO2, facilitating the capture of carbon due to its higher concentration in the gas stream, and avoiding the separation, fixing and concentration processes. However, this technique requires the prior separation of oxygen from the air, which requires more absorbent membranes. The advantages of

The Brazilian Congress on CO2 arose from the need to unify the technical discussion – which already existed for specific, individual events of each area - and also to bring the issue of regulation to the debate table. According to Melissa Fernandez, manager of Technology and Innovation of the IBP, it is an opportunity to show what is being done by the academic community, how companies are operating, and to know the Government’s position on the matter. In the first edition, the Pre-salt dominated discussions with the question: what should be done with the newly discovered carbon reserves? In the second edition, the Conference focused on Brazil and domestic activities regarding CO2 technologies. The third edition brings a new concern, in addition to technological issues: the urgency of establishing a regulatory framework. According to Ms. Fernandez, the great merit of the congress is in joining industry professionals and academic researchers from Brazil and abroad. An audience of 300 participants is expected, consisting mainly of university researchers and companies from several Brazilian states and other countries, especially from Latin America. “Our goal is to cover the entire chain: capture, transportation, storage and conversion. We seek to add aca44

T&B Petroleum 37

Photo: Divulgation IBP

3rd Brazilian Congress on CO2 in the Oil, Gas and Biofuels Industry

demic experience - bringing renowned researchers for the event - and practice, inviting industry professionals to discuss the field work. We will also have the participation of foreign experts, which will provide an intensive exchange of information between countries,” she says. The program will consist of panels and roundtables, and technical sessions (oral and digital poster). Prominent names will be present. Among Brazilians, besides the teachers and researchers Jussara Lopes Miranda, UFRJ, and Ivani Bott, PUC-Rio, the following people will participate in the congress: Professor Luiz Pinguelli Rosa, director of Coppe; Suzana Khan Professor, UFRJ; Professor José Luiz Medeiros, UFRJ. Among the professionals from the oil & gas industry, Marcel Eiki Katekawa, Technical Consultant of Petrobras; Ana Paula Fonseca, Petrobras Project Manager;

and Peter Derks, Senior Researcher at Statoil Brazil. Subhas Sikdar, Head of Clean Technologies and Environmental Policy (EPA) from the United States; Miguel Bagajewicz, Professor at the University of Oklahoma (USA); Gelein de Koeijer, CO2 Transport Specialist at Global Statoil (Norway); Hege Marie Norheim, Senior Vice-President of Sustainability at Statoil (Norway); Elizabeth Burton, General Manager at GCCSI America (USA); and John Bogild Hansen, Senior Consultant at Haldor Topsoe (Denmark) are some of the important international participants. CO2 and Pre-salt - technology and operation; carbon pipelines; process of separation and capture of CO2; CO2 conversion to fuels; global technological trends for CO2; and economic and regulatory framework are the themes of the panels and roundtables.

this process are the reduction of the combustion chamber and the absence of formation of nitrogen compounds (NOx). To increase output, a double reactor may be used – one for air and another for fuel – in a process called by chemical looping combustion, which uses metal oxide to increase the oxygen concentration, reducing the required amount of air / pure O2 . The cryogenic distillation – based on the separation of gas mixture by condensation and distillation at low temperatures – is now the most common method of production separation of O2 from air on a large scale, but the operating cost is high. The most commonly used substances for absorption of CO2 in the pilot plant in operation are amino-alcohol solvents such as monoethanolamine (MEA), diethanolamine (DEA) and methylethanolamine (MDEA). The method makes is possible to obtain carbon dioxide of 99.9% purity, but the separation capacity is limited by capturing only 50% of the generated CO2. Because they are widely used, the amines are technologically more mature than other substances, but are corrosive and react with NOx to form nitrosamines. The capture plant, in this case, is of major proportions that require the recycling

Photo: Petrobras Agency

CO2 demands a regulatory framework

of the solvent. There are also chemical processes of absorption by ammonia, cold methanol, charcoal and membranes. Adsorption – a phenomenon that occurs when a fluid, gas or liquid comes into contact with the surface of a solid adsorbent – has also been used to capture CO2. Various porous materials capable of adsorbing large amounts of CO2 have been studied and developed in recent years. They are efficient, cheap and reusable substances: zeolites, activated carbon, molecular sieve, nanoporous adsorbents, membranes and MOFs. The apple of the eye of chemists researching carbon capture proces-

ses, MOFs have great properties and can be used, for example, in the controlled release of drugs in the body, or in the separation and storage of hydrogen, among other applications. Jussara explains that one of the advantages of MOFs is the high thermal stability, higher than 400ºC; another is its porosity, which allows a high rate of adsorption. There MOFs of a single gram are able to adsorb more than 4,000 square meters of hydrogen on its surface. They are supramolecular structures constructed from metal ions and organic ligands that are considered the most promising, superior to other materials such as activated carbon and zeolites. Due to their flexible chemistry, MOFs optimize adsorbent capacity by the function of the ligands. Among the investigated metalorganic compounds, MOF-177, MIL-101 and MIL-53 (MIL – Matériel L’Institute Lavoisier – French term for MOF) were quite effective in absorbing CO2, and the latter, in CO2 and methane gas separation. In addition to all these properties, the small size places the MOFs at the forefront of research on the subject, opening new horizons for carbon dioxide mitigation in the oil and gas sector.

T&B Petroleum 37 45

OTC 2015 Preview

OTC 2015 will open with an award to Petrobras

he night before the official opening of the OTC 2015 at Reliant Park in Houston (USA), Petrobras will receive the highest recognition given to a company in the offshore sector for the third time: OTC Distinguished Achievement Award, offered annually to a corporation which has been recognized on the global market for its technological innovation. With this award in hand, delivered at dinner held in the auditorium of NGR Stadium, one of the spaces of the giant Reliant Park, the Brazilian oil company starts its participation in the biggest event of the offshore sector, organized by 14 institutions, including the Brazilian Institute of Oil and Gas (IBP), the only entity that is not part of the American board of OTC. The award has been granted for the technological advances consolidated by the oil company in charge of the pre-salt development. In February, the company reached a total production of 809,200 barrels of oil equivalent per day (boe/d), of which

Exhibition area: 696,604 square feet Visitors: 108,300 Companies: 2,649 Countries: 130 46

T&B Petroleum 37

by Beatriz Cardoso

cated to young professionals to allow them to present their research projects. Brazil has a strong presence – The opportunities of the Brazilian market will be highlighted on the second day of the event by the Executive Chairman of Barra Energia, João Carlos de Luca, who left the position of President of IBP last March. Large discoveries in the ultradeep waters of the pre-salt area of offshore Brazil, comprehensive consistent local content policy in force for more than 10 years, and Petrobras expectations to increase its current oil production from the 2.7 mb/d to 4.2 mb/d in 2020 are some of the topics João Carlos de Luca will present in the special session on May 5th, which will also have the participation of Roberto Furian Ardenghy, Deputy Consul and Head of the Trade Promotion Bureau of the Consulate General of Brazil in Houston. This year the Brazil Pavilion, organized by the IBP, received confirmation from 44 institutions and companies to participate in the event, including the return of Petrobras, which had suspended participation of its own stand two years ago and now will share space with the IBP. In addition to the Brazilian oil company, the following companies will take part of the Brazil Pavilion: Adelco; Altona; Altus; Brasa Shipyard; Brasfond; Chemtech; Cladtek; Csl Ropes; Emdoc; Fechometal; Flexomarine; Forship Engineering; Gascat; Keppel Fels Brasil; Locon; MFX do Brasil; MRM Logistics; Navium; Netzsch do Brasil; Oceânica; Orteng; Oxifree; Powerpoxi; Prumo; Radix; Rio Engenharia; Roxtec; Sandech Engineering; Swanson-GP; T&B Petro-

Photos: T&B Petroleum Image Bank

leum Magazine; Tecnofink; Thomson Reuters; Triunfo Logística; Uphill; Vanasa Multigas; Villares Metals; Vol; Vulkan; Weg. There will also be stands in the Pavilion for the National Oil, Natural Gas and Biofuels Agency (ANP), the State Secretariat for Economic Development, Energy, Industry and Services (SEDEIS), the Industrial Federations of the states of Rio de Janeiro (FIRJAN) and Amazonas (FIEAM), the National Organization of Petroleum Industries (ONIP) and TN Petroleum Magazine, the only Brazilian publication with consecutive participations at the OTC for the last 15 years. Brazilians will also meet in the events organized by BRATECC - the Brazil-Texas Chamber of Commerce - with the purpose of increasing business for Brazilian companies that search for opportunities in the United States. There are also missions being organized by institutions from Brazil, such as the Brazilian Support Service to Micro and Small Enterprises (SEBRAE).

Brazil Pavilion Booth 1117 Exhibition area: 17,600 square feet Organizations: 2 Companies: 39 Organization: CNI/Fieam Participating Companies: Adelco; Altona; Altus; Brasa Shipyard; Brasfond; Chemtech; Cladtek; Csl Ropes; Emdoc; Fechometal; Flexomarine; Forship Engineering; Gascat; Keppel Fels Brasil; Locon; MFX do Brasil; MRM Logistics; Navium; Netzsch do Brasil; Oceânica; Orteng; Oxifree; Powerpoxi; Prumo; Radix; Rio Engenharia; Roxtec; Sandech Engineering; Swanson-GP; T&B Petroleum Magazine; Tecnofink; Thomson Reuters; Triunfo Logística; Uphill; Vanasa Multigas; Villares Metals; Vol; Vulkan; Weg Booth 1241 Exhibition area: 9,600 square feet Organizations: 4 Companies: 5 Organizations: ANP, FIRJAN, ONIP and SEDEIS Participating Companies: Oxifree, Petrobras, Powerpoxi, Prumo, Tecnofink T&B Petroleum 37 47

professional profile

Stone by stone A native of the state of Santa Catarina, this is how Johnar Olsen refers to his successful story: “A career in life is like a castle: it is built stone by stone”, says the 47 year-old mechanical engineer. He has been in charge of Scania of Brazil, a subsidiary of an industrial group in Norway, since 2009.

Photos: T&B Petroleum

by Beatriz Cardoso

After 20 years working in the oil and offshore industries, Olsen cites one of the basic rules for success, ‘learn to give up some things in order to win others’. Moreover, he points out the importance of listening: “I think one of the success formulas was to elect some people I admire as board members for my professional life. Don´t take any important professional decisions without consulting them, “ he advocates. When first meeting him, the name and the Nordic features of Johnar Olsen suggest that he is just another foreigner in a market filled with professionals from all over the world, especially when aware of his track record: in 25 years as a professional, he has been part of Norwegian corporations and institutions, as well as president of Scania. However, he is a Brazilian from the city of Lages, in the mountainous plateau in southern Santa Catarina, a place where many settlers and travelers have ended up, including one of Johnar’s ancestors, who left Norway together with a group of countrymen – in true Viking tradition – in search of gold in California in the United States. Although they crossed the Atlantic on the way to San Francisco, California (USA), they ended up in São Francisco do Sul, in the state of Santa Catarina. The vessel on which they were traveling was not able to cross the then dreaded Cape Horn, an obligatory passage to the Pacific coast. At the time, there was no the Panama Canal... ”I gave continuity to this story because my daughter was born in the United States, completing the journey of my ancestor. So she has the second name of the boat that sailed from Norway with those adventurers - Sofie,” says Johnar. Besides daughter Aislyn Sophie, he has two other children: Johann Kael and Kihan Jordan. Choice of profession – His father, an agricultural engineer, influenced the graduation of three children. “I am the eldest son of a family of engineers: my brother is a mechanical engineer and is now president of a Swiss company in Brazil. And my sister, currently living in Aberdeen, Scotland, has a PhD in chemical engineering.” Johnar remembers childhood: “fantastic, the way we lived in the countryside”. The three brothers had all the support of their devoted father and mother, something that was crucial for the young man who passed the college entrance exam at age 16 and had to leave the comfort of the family to live in a fraternity in Florianopolis. “The Federal University of Santa Catarina (UFSC) was considered at the time the Number 1 in Brazil for mechanical engineering. That was my choice, guided by my father and some cousins,” he recalls. He did not only live

T&B Petroleum 37

great productivity. In the end, everyone wanted to work in this department,” he jokes.

professional profile

his personal life, for all his friends and family were in the South. Coming to Rio de Janeiro ensured him a big contract in the division started in Brazil, Kvaerner Process Systems. “We also did some basic projects for various platforms for the Engineering and Technology division of the same company,” he says. The Norwegian company had been undergoing a great time in Brazil, with an industrial plant in Curitiba providing equipment for major oil and gas projects in the country, plus a maintenance unit in Macaé (RJ). With the merger between Aker and Kvaerner, he became country manager of the latter for four years (2001-2005) and, later, also for the Field Development division. In 2005, he decided it was time to learn more about the international market, accepting the invitation from INTSOK / Norwegian Oil & Gas Association, the Norwegian association for the oil industry, working together with the Consulate of Norway.” It was when I had the pleasure of working with Erik Hannisdal of Innovation Norway (Norway’s industrial development agency abroad), when we founded the incubator NBIO – Norwegian Business Incubator Office, today the Innovation House,” said Johnar. The success of the initiative was so great, he received an invitation to set up the same model in Houston. “Today, most Norwegian delegations in other countries follow the pioneering concept implemented in Brazil.” Back to the front – For the five years he worked at INTSOK, Johnar describes it as the period in which his network was expanded, bringing with it great advantages. “In addition, working with the Norwegian industry strengthened the dignity and respect I learned in childhood. For me, it was proof that you can succeed without cor50

T&B Petroleum 37

rupting anyone, and that ethics should be a natural part of our lives,” he emphasizes. At INTSOK, he gained a deep knowledge of the market and international relations. He says he received many offers from multinational companies. “I resisted the temptation because my career was in an improvement stage,” he says. But he missed that feeling of winning of a major contract. In 2009, the opportunity came when the CEO of Scania group, also from Norway, came to Brazil to interview candidates to head the Brazilian subsidiary. As a representative of INTSOK, Johnar supported the company throughout the week. At the end of the period, at a dinner with the CEO, he was surprised by the proposal. “They told me, ‘Johnar, actually we came to analyze your performance. After this week, we have no more doubts. We want you to be responsible for the activities of the company in Brazil‘. I felt it was time to return to the front,” says the executive, who has been president of the Brazil Scania Industrial Ltda for six years. The group has three business areas: steel manufacturing (Energy), a segment in which the company has been operating for over 350 years; ship propulsion, a hundred years completed in 2013; and the offshore segment, with a strong tradition in cargo, ballast, offloading and mooring systems. Foundations consolidated – One of the last castle stones, which is still in the foundation, according to Johnar, was winning the largest single contract throughout the company’s history: supplying offloading systems for FPSOs on replicating scale for operations in the pre-salt. “I have a success story, but the past does not guarantee the future. I have other achievements ahead, with all its challenges, making the taste of victory even better,” says

the avid executive to study. Last year, he concluded another specialization: a course at the Harvard Business School, entitled ‘Making corporate boards more effective’. One of the winning formulas, for him, was to elect some people he admires as the board members of his professional life. “I do not take any important decision without consulting them. Among these wonderful people who are my idols are my friend John Wagner and my cousin Amaury Olsen, in addition to all my family, especially my wife, Weruska” confesses Johnar Olsen. The executive is also a member of other boards, including in the area of Research and Development for the oil and gas, offshore, marine and environmental industries, among others. He has also been president of the Brazil-Norway Chamber of Commerce, and he is a board member today. How to maintain the balance between mind and body in the midst of so many chores and responsibilities? “Sports,” says Johnar, and lists the favorite ways in which has competed and/or practiced: “basketball, judo, gymnastics, indoor soccer, cycling, skydiving, motocross, skiing, wakeboarding, windsurfing, kite surfing, stand up paddle and marathons. In recent years, I have begun training for triathlon with the goal of one day completing an Iron Man test” he says. Olsen ends the interview confessing feeling moved to share his experience with readers. “I am a Brazilian from the interior of the country who discovered the world of executives without making any shortcuts, always building and strengthening the basis for future decisions,” he states. “Therefore, I feel honored to take part in this section of the magazine, since there are many other inspiring people who should be here in this special edition of T&B Petroleum. I now feel part of the magazine’s history!“

T&B Petroleum 37

company profile

SPECIALTIES FROM BRAZIL SUPPLIED

by Villares Metals

Villares Metals is the main manufacturer in the Southern Hemisphere of specialty alloys and special steels for very important market segments like oil&gas, chemical and petrochemical, power generation, aerospace, aeronautic and defense.

Rua Alfredo Dumont Villares, 155 CEP 13178-902 Jardim Santa Carolina, Sumaré - SP - Brazil phone (19) 3303-8000 www.villaresmetals.com.br

Rogério Cotta F. da Silva is Bachelor’s Degree and Master’s Degree in Metallurgical Engineering by the Escola de Engenharia da Universidade Federal de Minas Gerais, with MBA in Enterprise Management - Fundação Getúlio Vargas (FGV) and Management Academy Böhler Uddeholm Academy – Kapfenberg, Austria and Düsseldorf, Germany. He has been worked at the Villares Metals plant in Sumaré / São Paulo / Brazil since 1992, now managing the Specialties Product Division at the commercial department. 52

T&B Petroleum 37

illares Metals supplies specialties as bar sticks for investment casting in Ni based alloys, wire rod in special steels and specialty alloys, open-die-forged parts and round, flat or square forged or rolled bars, in special engineering steels, special tool steels, special stainless steels and specialty alloys. They are melted by a conventional process, at the electric arc furnace (EAF), or a special process, by Vacuum Induction Melting (VIM). At the majority of them, the melting processes are followed by a remelting process by either Vacuum Arc Remelting (VAR) or Eletroslag Remelting (ESR). The main advantage of the melting process under vacuum is obtaining alloys with high purity level, plus restricted chemical composition ranges and high content of reactive elements such as Aluminum and Titanium. The VAR and ESR processes are important not only for obtaining more homogeneous ingots as to segregation, but also for promoting additional refining towards cleanliness and residual contents of some deleterious elements. After the deformation at the Forging Shop or the Rolling Shop, specialties suffer controlled metallurgical transformations at the Heat Treatment Shop to attend the most severe conditions. The designation specialty alloys is wide and general, comprising a group of alloys which shows specific characteristics that differentiate them from steels in general. The specialty alloys are mainly nickel or cobalt base alloys, generally used under situations where high performance is necessary for the following properties: mechanical resistance (mainly at high temperatures) and creep resistance; oxidation resistance at high temperatures; corrosion resistance (e.g. surgical implants), electrical resistivity, thermal expansion and thermal and electric conductivity. Some steels are included in the specialty alloys group due to specific applications and requirements that demand the same fabrication process employed for nickel or cobalt base alloys. The manufacturing of long products in specialty alloys at Villares Metals is a result of gathered experience since the late 70’s, when development programs were started for nickel base alloys at the São Caetano do Sul Plant, Aços Villares S.A. - High Alloy Unit, and at the Sumaré Plant, Eletrometal Metais Especiais S.A.. Those were the results of efforts for nationalizing products which were not manufactured in Brazil up to then, through the diligence and willingness for innovation of the areas of a metallurgical R&D (Research and Development) Center, Technology and Production and Sales and Marketing teams of the both companies. In 1996 these two plants have added their technologies to act as Villares Metals. The attainment of this initial stage associated with the continuous development of knowledge and technology allow Villares Metals to have today a well consolidated technological stage in the production of specialty alloys. Adding to and preserving

Photo: Courtesy

the technological innovation spirit which has always guided the activities of the Villares Enterprises, Villares Metals keeps working on the development of new products/processes and continuous improvement programs. In order to achieve that, all areas are dedicated and committed to carrying out development tasks and continuous improvement:“Technology creating value by integrating all areas”. QUALITY COMMITMENT / ASSURED QUALITY The manufacturing technology of specialties, associated with laboratory facilities, working teams committed to development and quality and well-known certifications allow Villares Metals to supply products with quality and effective specialized technical assistance to ensure customer satisfaction for both the domestic and foreign markets. The main brazilian and international certifications are as follows: ISO 9002: general applications;

ISO/IEC 17025: brazilian accreditation for the Chemical Laboratory; NBR15100: similar to AS9100 standards, quality management system for aerospace industry ; NADCAP: National Aerospace and Defense Contracts Accreditation Program for Heat Treatment and Non Destructive Testing areas; NorSok: Norsk Sokkels Konkuranseposisjon or Norwegian shelf Competition Position NORSOK (The competitive standing of the Norwegian offshore sector) is the industry initiative to add value, reduce cost and lead time and remove unnecessary activities in offshore field developments and operations. The NORSOK standards are developed by the Norwegian petroleum industry as a part of the NORSOK initiative and are jointly issued by OLF (The Norwegian Oil Industry Association) and TBL (The Federation of Norwegian Engineering Industries). NORSOK standards are administered by NTS (Norwegian Technology Standards Institution) – M650 specification “Qualification of manufacturers of special materials” / MDSD47 specification corresponding ASTM A 479-08, grade UNS S31803 for bars / MDSD57 specification corresponding ASTM A 479-08 grades UNS S32550 and S32760 for bars; IBQN-CNEN-1.16: Instituto Brasileiro de Qualidade Nuclear (IBQN) / Comissão Nacional de Energia Nuclear (CNEN). Materials for components of brazilian nuclear power plants. MAIN SPECIALTY ALLOYS AND SPECIAL STEELS Alloy 718; Alloy 625; Alloy 725; Alloy 600/601; Alloy 400; Alloy X750; Alloy 80A; Alloy 751; Alloy 90A; Alloy 276; Alloy Ni 200/201; Alloy A20Nb3; Alloy 825; Alloy 925; Alloy S82 / S92 / 182; Alloy ASTM F562; Alloy NiFe60/ NiFe70; Alloy 8020 / 7030 / 6015 / 3520; Alloy Ni10%Cr and Ni95%+(Mn, Si and Al) for thermocouple; Alloy INVAR36; Alloy FeNiBCT; Alloy 800H; Alloy 713 / 713LC and GMR235 ;Maraging steels grades250, 300 and 350; Austenitic PH steel grade A286; Austenitic stainless steel grade for surgical implants ASTM F138 / DIN WR. NR. 1.4441; Super austenitic steel grade 254 T&B Petroleum 37

company profile

Brazilian engineering is

competitive

The critical scenario for the oil and gas industry in Brazil is yet another opportunity for Brazilian engineering companies to show what we are made of.

Rua Uruguaiana, 94 / 8ยบ CEP 20050-091 Centro, Rio de Janeiro, Brazil phone (+55 21) 3970 8900 www.forship.com.br

Fabio Fares President and CEO of Forship Engineering 54

T&B Petroleum 37

very crisis can be seen as an opportunity or as a challenge that leads us to make an even bigger jump. This is the thought of every entrepreneur who believes in the ability of their business to build something positive, even in adverse scenarios. And that is what Forship Engineering has been doing for almost 17 years, since it was founded in July 1998, less than two months after the creation of the largest logistics company in the oil and gas sector, Transpetro. Not coincidentally, the origin of Forship has strong ties with the shipping and offshore industry, since our company was born out of the market demand at the time, as well as for the knowledge and practice that would become our great expertise: commissioning engineering. The increasing use of the FPSO (Floating Production Storage Offloading) offshore units for production, storage and transfer of oil in ever deeper waters was undoubtedly the main reason for Forship to start activities. A decade and a half later, with a consolidated track record of success, we have the recognition of the international market for the capacity of Forship and for Brazilian engineering in the marine and offshore industry. Proof of this achievement is the three awards won by Petrobras in the Offshore Technology Conference (OTC), the largest organization in the world in this industry, for offshore production systems that have had the participation of our engineering, in addition to numerous production records in deep water. No wonder that Brazil has the largest FPSO fleet in operation in a single country, many of which were built with the help of Forship expertise and creative Brazilian engineering. Merits which are confirmed by the performance evaluation reports received by Forship in more than four dozen offshore projects, many of them responsible for establishing new paradigms in deepwater production. Among the most emblematic projects are the P-40 platforms, operating since 2001 in the Marlim Sul field, and the P-53, which began production in 2008, in the Marlim Leste field in the Campos Basin, both are Floating Production Units (FPU). And then there is the so-called self-sufficiency platform , the FPSO P-50, in the Albacora Leste field in the Campos basin. It was this expertise that has made us able to participate in pioneering projects such as the P-55 platform, the largest semi-submersible built in Brazil, operating in the Roncador field in the Campos Basin, in the northern coast of the state of Rio de Janeiro. In addition to monitoring and auditing the commissioning activities of the consortium that carried out the integration at the Rio Grande Shipyard, Forship was responsible for planning the commissioning management and solutions for the remaining backlog of onshore phase; commissioning of the pending systems for oil, gas or draft and the final transfer of operations to Petrobras team. Work that yielded the 9.5 score in the performance evaluation report of the Brazilian oil company.

Photo P 55: Petrobras Agency

Leader in commissioning, Forship is resuming its activities in construction and assembly (C&A) with the strategic vision to consolidate leadership in this area, where we have won two hefty competitions: the completion Project Closure for the FPSOs P-58 and P-62. We are responsible for completing construction and assembly services, supporting the startup of equipment and systems, assisted operations and technical assistance for these two offshore platforms operating in the Campos Basin. These services are running on the P-58, in the Parque das Baleias fields, which have been in operation since December 2013, and the P-62 in the Roncador field, which produced first oil in May 2014. The work started in April this year, lasting four and a half months and may be extended for an equal period, which strengthens the position of Forship as a company of engineering solutions in the EPC segment. Moreover, it shows our competitiveness by offering high-level quality services at international market prices. And that is why we have had several contracts renewed: we now enter the seventh year of the maintenance and modifications contract for the Octopus A fixed platform, also in the Campos basin. But Forship, as well as Brazilian engineering, have not only advanced in the offshore market and have not been restricted to the oil and gas industry. With ingenuity to innovate and ongoing training of our staff, we have expanded and diversified our area of expertise in various segments of engineering. The performance of Forship in onshore projects in the oil, gas and energy industry has enabled us to move forward onshore and win new projects and new markets. We were the winners of the first competition of Northeast Refinery maintenance services (Rnest) - Abreu e Lima refinery in Ipojuca, on the southern coast of the state of Pernambuco. And we have already started maintenance of load-lifting system services (cranes and weight switchgear) in Petrobras UO-BC units in Macaé, in the UM-BC; We are also responsible for the construction and assembly, commissioning, pre-operation and assisted operation of the treatment system for water produced at Petrobras’ Bonsucesso Station, which is part of the water injection project to expand the onshore field Carmópolis (SE). Forship also won the construction project and installation of an interim interconnection between OSDUC IV pipelines and the OSDUC II at Petrobras’ Cabiúnas Terminal (TECAB) in Macaé. These pipelines transport the oil produced in the North Fluminense, from Macaé to the Waterway Terminal of Ilha Comprida in São Gonçalo (RJ). In the energy sector, we remain at the head of supervising operations of Eneva’s Pecém II thermoelectric plant, which is strategic to the Pecém Industrial Complex, one of the most promising areas of Ceará. We have also consolidated a prominent position in the mining sector, through our information technology

company, HMSWeb, whose commissioning management tool has been adopted by Vale in all projects developing in Brazil and worldwide. To meet the demands of the huge Moatize II project led us to create Forship Mozambique (FSM), covering an integrated logistics infrastructure for railways - the consolidated expertise from Forship Engineering in the North Logistics Capacity Program (CLN 150) for Vale in northern Brazil, which allowed for the expansion of Carajás logistical capacity to 150 million metric tons per year (Mtpa). We also participate in Vale’s project for nickel in Long Harbour, Canada. All these developments show the alignment of Forship to create HMSWeb in 2007, which was a decisive year for the internationalization of the company that now serves customers in strategic markets in the mining, oil and gas industries. Our capacity for innovation ensures the sustainability of the IT company, which is presenting its technological tool for commissioning management in mobile format, HMSMobile for the international market at the OTC 2015 in Houston. Aware that it is essential to give full support to customers and partners, in addition to engineering services, Forship has also structured a consulting division that now supports giants in the oil and gas industry, such as oil Anadarko and Repsol. The deep knowledge in implementing projects in the shipbuilding and offshore industries has enabled Forship to expand its participation in the segment of Bank’s Engineering for financial institutions that support projects in this industry, such as Caixa and Banco do Brazil. Confirming our leadership also in this area, we have achieved, through Forship Asia (FSA), the regulatory support contract for Jurong, regarding the FPSO Libra, the first production unit of the pre-salt field by the consortium of giants that includes Petrobras, Shell, Total, CNPC and CNOOC. Factors like these make us believe that, even in a period so critical and turbulent on the world stage as oil and gas, it is possible for Brazilian engineering to grow sustainably. That is what Forship Engineering is doing, based on innovation, credibility and competitiveness. T&B Petroleum 37

market

New Oil Market Paradigm the Brazilian Perspective While for many oil producing and exporting countries the new world oil price scenario will impose heavy losses in market share, setbacks in economic development, and even potential domestic and international instability, the situation for Brazil points to much less dramatic consequences, and even some possibly favorable results. Understanding how the new oil market paradigm will affect Brazil can shed light on how the country will fare as a world oil player, and the effects on its oil industry and local content equipment and service sector.

José Diamantino de Almeida Dourado works in Centro Federal de Educação Tecnológica Celso Sukow da Fonseca/Cefet.

Cleveland M. Jones is a researcher at the Inog (Instituto Nacional de Óleo e Gás)/CNPq.

T&B Petroleum 37

razil will likely set a course that prioritizes its conventional oil resources, which have shown themselves to be very competitive, with individual well production rates of 20 to 30 thousand bopd or more. Those projects will forge ahead, helping Petrobras to improve its cash flow and overcome the limited sources of investment capital available to it. Those projects will also improve Brazil´s balance of payments, both in the short run and further out. Brazil will continue to build its oil production, which implies that Brazil will not be among the countries that will suffer losses in market share of world oil production and exports. If Saudi Arabia´s strategy is even minimally successful, as a low cost producer, it will eventually recover market share, but Brazil will also likely increase its share. The corresponding increase in local content demand in Brazil points to opportunities for increased foreign participation. The combination of the current market forces at play and Brazil´s likely policy response also suggest that the country will make adjustments to its current regulatory framework in order to make the country more competitive and recover its attractiveness in financial markets. The new oil market paradigm also has unexpected consequences for Petrobras in particular, the major oil industry player in Brazil, and a company that had been a stock market darling in the past. Despite some negative effects, Petrobras stands to benefit from the current situation and trends, a circumstance that the investment community seems not to have adequately grasped. Recent world oil scenario – The foundations and motivation of the current oil price crisis suggest that it is not a price oscillation due to short-term changes, as happened in 2008-2009. This is a structural crisis, where the factors that precipitated the price change have their origin in a deliberately executed strategy by Saudi Arabia, and in supply trends that are not likely to reverse themselves in the near future. Thus, the current scenario can last a long time without suffering physical, financial or political limitations, and the potential responses by affected countries are also limited and innocuous, which suggests that they can do little to reverse the current scenario.

Photo: Depositphotos

The recent fall in oil prices can be related to an increase in supply, mainly from new shale gas and shale oil production in the US, and to the weak performance of the world economy in general, with the consequent decrease in world demand for energy resources. However, this time, in the face of the newest threat to the revenue base of oil producing and exporting countries, instead of acting as a swing producer, reducing its production in order to prevent a drastic fall in prices, Saudi Arabia decided to fight the threat to its dominance as the leading world oil producer. Its decision was sealed not by an action, but by an omission - it did not do what was expected, at least what the other members of OPEC and large oil exporters expected of the country. The experience of the last great oil price oscillation, precipitated by the financial crisis of 2008, shows that the ups and downs of oil prices can be quite extreme. The price of a barrel of Brent crude reached a peak of over US$140, in July of 2008, only to drop to less than US$50 six months later. Subsequently, prices established a trading level of approximately US$100, remaining in a relatively narrow trading range between US$110 and US$90, until September of 2014 (Figure 1). The price behavior of that cycle clearly represented a volatility in prices in response to short-term changes of the world economic scenario. In mid-2014, as the imbalance in supply and demand became more evident, the OPEC members traditionally associated with more aggressive price behavior, such as Venezuela, Iran and others, clamored for an

Figure 1. Free On Board price (US$/bbl) of brent crude since 2004 Source: US EIA, 2014a.

OPEC meeting in order to discuss a possible reduction in production, expected from the traditional swing producer Saudi Arabia. That was the expected outcome, based on the traditional Saudi posture of reducing its production in order to stabilize falling prices. Surprising many, Saudi Arabia decided to do nothing, letting prices float freely according to market conditions. After a period of approximately three years of relative stability near the US$100/bbl level, oil prices fell precipitously, and the crisis that oil producers feared was definitively established. Oil prices suffered a free fall, reaching less than US$50/bbl in January, 2015. Saudi Arabia deliberately accepted the ire of important proT&B Petroleum 37

market

ducers, who expected it once more to sacrifice its own production in order to prop up prices for all producers. The motivation for the new Saudi posture was its desire to defend its position as the main oil producing country in the long term, a position based on strong fundamentals - immense oil and gas reserves and extremely low production costs, estimated at less than US$10/bbl for lifting costs (US EIA, 2014b). These reserves could guarantee it revenue near current levels for the next hundred years, if it can defend its production share, and if oil remains the dominant energy resource of the world for that long. Thus, defending its position and extending the “the age of oil” far into the future is a long term, strategic effort. Low oil prices directly affect the alternative energy resources that could potentially compete with cheap, conventional oil produced by Saudi Arabia, such as: • the Canadian tar sands, whose production can only be economically justified with oil prices near the recent levels of approximately US$100/bbl; • shale gas and shale oil produced in the US, generally considered to be higher cost resources than conventional oil and gas; • unconventional energy resources in general, including renewable fuels, such as ethanol and biodiesel, which already had trouble competing with oil prices when oil was around US$100/bbl; and • conventional resources produced with leading edge technology, which is generally more expensive, such as oil from some fields in the Brazilian pre-salt region, whose operating costs may not be as low as that of post-salt fields currently being produced. The countries most affected will be those that imagined that they would be able to replicate the production growth experience of the US (THE ECONOMIST, 2014). However, US oil production, including that from unconventional resources, is not likely to be threatened, even if future growth slows. Neither Saudi Arabia nor the US seem to believe that the shale gas boom will suffer significantly under the new prevailing market conditions. Many analysts continue to confidently suggest that North American production will continue to increase, and some estimate a 20% growth in production for 2015, in a clear demonstration that the notable technological strides achieved in unconventional oil and gas production techniques can overcome even the most unfavorable market conditions observed currently (NYSVEEN, 2014). For other countries, the only alternative is to adapt to the new reality of the market, according to their individual situation. The United States scenario – a didactic example for Brazil – The rise of the US as a shale gas and shale oil producer already indicated that the country would overcome Saudi Arabia as the world´s leading oil and gas producer by 2019, or sooner. The US experience, not the country 58

T&B Petroleum 37

itself, may be considered the major target of the Saudi strategy, because it represents the imminent threat to its dominance of world oil production in the long term. If the US experience with shale gas could be replicated worldwide, as some have speculated, Saudi dominance of future oil production could indeed be threatened. Fundamental changes in the structure of the supply and demand characteristics of the oil and gas markets, as in world markets for any other important commodity, naturally do not occur without significant reactions. However, the US has no intentions of retaliating or reacting against its important ally in the Middle East, and will likely only strengthen its own protectionist policies in favor of an industry of extreme importance to the country. It may also utilize its new condition as an important and growing world producer, in order to advance its own geopolitical objectives, such as through the supply of LNG to allies, or displacing Russian supplies to Europe. On the other hand, estimates and predictions for the growth in production from shale gas resources in many countries seem to have been overestimated, since they did not fully take into account the specificities of local conditions, in relation to those in the US, nor the inadequacy of their industrial and logistical infrastructure. The lesson for countries hoping to develop their unconventional resource potential is clear – those resources will not be economically viable unless three essential elements are present: a strong and geographically diversified oil service industry; an adequate production infrastructure; and developed domestic markets to provide demand and leverage the benefits of local production, without having to rely on export markets. In Argentina, for example, the technically recoverable unconventional dry shale gas resource potential was estimated to be 802 Tcf, when the US figure is estimated to be 637 Tcf. In Brazil, that potential was estimated to be 245 Tcf (US EIA, 2013). These assessments, however, do not take into account the lack of the above three essential elements in those countries. Researchers suggest that despite the ample geological occurrence of unconventional gas resources in those countries, there are enormous difficulties to be overcome in order to achieve a significant production (CHAVES, RODRIGUES, JONES, 2012; RODRIGUES, CHAVES, JONES, 2012). In the US, there are strong subsidies built into fossil fuels, and especially in relation to unconventional sources of fossil fuels. Besides fiscal incentives that the industry enjoys, there are significant advantages because of the extensive oil and gas pipeline system that exists, as well as a robust demand for natural gas that is well rooted in the economy. Natural gas has long been a major portion of the energy matrix of the US, currently approximately 27% of primary energy demand in the country, and growing (US EIA, 2014d). Low gas prices in the US, insulated from higher international gas prices, attract ever more industries to the country, such as the petrochemical and

fertilizing industries that use natural gas as a basic raw material for their production processes. The magnitude of investments in shale gas and shale oil in the US, and their effect on GDP, estimated at between US$380-690 billion annually (LUND et al., 2013), also suggest that the country will not allow their continuity to be endangered. Brazilian Energy Policy – The Brazilian federal government has sent conflicting signals in its national energy policy. On one hand, it stimulated basic energy demand, especially for fossil fuels, by pressuring Petrobras to maintain artificially low fuel prices, and also provided hefty fiscal incentives to the domestic automotive industry in order to lower car prices and bolster demand. On the other hand, its fuel price policy has restricted Petrobras revenues and curtailed incentives for new investments. The government also promoted the 2013 12th ANP bidding round for blocks involving frontier areas and unconventional resource potential, as well as other programs designed to stimulate E&P of unconventional resources and alternative energies. However, it has not ensured that essential elements for success of unconventional resource development were in place before sending out a call to attract investments in the sector. Maintaining artificially low fossil fuel prices has diminished the attractiveness of developing unconventional energy resources in the country. At the same time, there are still no concrete fiscal or other incentives in Brazil specifically designed to stimulate business interest in participating and developing this new energy sector in the country. Thus, there are no significant unconventional resource projects in Brazil that could be adversely affected by the new oil price paradigm. Brazil has nothing to lose in unconventional resource potential, given that those projects never enjoyed conditions to make them viable. Nevertheless, the energy policy of the US presents a didactic example of a path to be followed by Brazil in order to protect its own oil and gas industry. Brazil already has an extensive experience with fiscal policy tools, which have been used to support specific industrial sectors considered strategically important. It is now also beginning to deploy policies designed to create the other favorable elements for resource development. The closest thing that Brazil has in terms of fiscal incentives for its oil and gas industry is its multi-year infrastructure investment program (Programa de Aceleração do Crescimento - PAC), since it provides fiscal and other incentives for infrastructure, and sectors such as steel, on which the oil and gas industry is heavily dependent (BRASIL, 2014). In relation to investments in infrastructure, there is a clear need to improve the competitiveness of the Brazilian economy in general, in order to reduce the so-called “Brazil cost”. Such efforts would help un-

conventional resources achieve viability more easily. An improvement in Brazil´s infrastructure would also benefit conventional oil and gas sectors in the country, since recent studies suggest that conventional resources onshore and in mature basins represent a significant potential in recoverable oil and gas (PEREIRA, 2012). Brazil´s second PAC (PAC 2) is heavily weighted towards infrastructure and logistic projects that can improve economic efficiency and competitiveness. It suggests that the government recognizes the importance of upgrading the national transportation network and other infrastructure systems, and has taken steps to improve those conditions in Brazil. In this sense, Brazil is evidencing a commitment to emulate at least some of the structural conditions in the US that have favored the growth of its energy sector (BRASIL, 2014). Brazil is also slowly moving towards implementing the other essential element in order to support an unconventional resource industry - the existence of a strong and stable demand for natural gas. Petrobras included investments of more than US$10 billion in industrial fertilizer plants in its multi-year strategic plan (Plano Estratégico Petrobras 2030) and its long range business plan (Plano de Negócios e Gestão 2014 – 2018) (PETROBRAS, 2014). This strategy seeks to emulate the successful US experience, including a revival of some industrial sectors heavily dependent on natural gas. The demand for vehicular natural gas in natural gas vehicles (NGVs) was also suggested as an important development vector for the natural gas industry in Brazil and for the economy as a whole (DOURADO, JONES, CHAVES, 2010), but that suggestion does not seem to have found receptivity in the energy policies of the federal government. While not entirely without negatives, gas-fired electricity generation will also guarantee high demand for natural gas. Implications for Brazil – Brazil recognizes the factors that set favorable conditions for the successful growth of the shale gas and shale oil industry in the US, as well as the revival of some of its industrial base. Those factors are not yet fully present in Brazil, so it must continue to prioritize its conventional oil resources, which have shown themselves to be very competitive. While concentrating on conventional resources, it is important to realize that future oil production in Brazil will be mainly driven by the giant pre-salt development projects, which are producing over 700 kbopd plus significant quantities of gas (TN PETRÓLEO, 2014). Production is rising fast in absolute terms and as a percentage of total production (ANP, 2015), having reached 28% of total production by the end of 2014 (Figure 2). Brazil´s pre-salt oil production should not be much affected, since it is based on long-range projects, and T&B Petroleum 37

market

Figure 2. Pre-salt vs total oil production in Brazil (thousands of boe per day). Source: data from ANP, 2015.

is generally considered viable even at oil prices near US$40 to US$50 per barrel (PETROBRAS, 2015). In the Brazilian pre-salt region, individual well production rates are as high as 30 to 40 thousand bopd or more, placing them among the top 1% of the most productive oil wells in the USA, for example (US EIA, 2014c), and among the top producing wells in the world. Since major pre-salt projects are already underway, and the respective FPSOs are projected to come onstream in the next few years, production is not likely to fall short of approximately 5 million bopd in 2020 (PETROBRAS, 2014). Thus, Brazil will continue building a major world-class oil and gas industry, including a large, diversified and growing support base of industrial and service businesses dedicated to meeting the demand for local content mandated for the projects currently under development. The most affected Brazilian energy sectors due to lower oil prices will likely be new solar energy projects and the sugar and ethanol industrial complex, and to a lesser degree, the wind energy industry. The Brazilian wind energy industry is one of the most competitive in the world, including in comparison with conventional energy alternatives, such as hydroelectric projects and gas fired thermoelectric plants, so it will be less impacted than other alternative energy industries. The solar energy industry, however, in Brazil as in the rest of the world, will likely be severely impacted by the fall in oil prices, since it already was the highest cost alternative energy source. Of special importance to Brazil, the sugar and ethanol industrial complex has been suffering the effects of low domestic gasoline prices, held artificially low as part of the inflation control policies in effect in the country. In contrast to the current fuel price scenario of most countries in the world, gasoline prices in Brazil have not come down, and in fact have increased. Thus, ironically, lower oil prices may actually benefit Brazilian ethanol and biodiesel producers, and strengthen that important alternative fuel segment, which recently (in 2009) represented more than half of the total Brazilian automotive fuel mix (JONES, 2010). 60

T&B Petroleum 37

Brazil also may be somewhat impacted because its expectations, whether realistic or not, in relation to the eventual production of unconventional oil and gas resources, will be frustrated by low oil prices. Such prices are a critical factor for the viability of that production, which is already suffering from many other structural handicaps, related to the lack of infrastructure and a well-developed conventional drilling history in areas where unconventional resources could be targeted. Even so, Brazil has an array of options in relation to the energy policies that it could implement in order to help the cash flow situation of Petrobras and the revenue of the federal government. Automotive fuel prices could be maintained at current levels, rather than lowering them, and the CIDE taxes on fuels could also be increased, or a combination of the two tactics could simultaneously improve the federal government take and Petrobras accounts. With a consortium composed of Petrobras and strong international partners, the Libra field project also ensures that Brazil will develop and produce the largest worldwide oil project proposed in the last decades (8 to 12 billion barrels of recoverable oil). But its bidding process in 2013 failed to attract bids above the generous minimums established (nearly US$6 billion in bonus payment). Recent recommendations have been proposed for improving the ANP oil and gas bidding round rules for pre-salt fields, in order to allow a more transparent and fair process of participation by interested companies (DOURADO & JONES, 2015). Those proposals would require Petrobras to declare in advance the level of participation that it wishes to retain in new pre-salt blocks, and with the proposed changes, there will likely be significant competition in future bidding rounds. Brazil will then be in a better competitive position in relation to other oil and gas countries, such as Mexico, which has made great strides in reformulating its own oil industry in order to attract more of the worldwide limited capital available for such projects. If, on one hand Brazil may lose due to lower oil prices, on the other hand, the new reality of the world oil market also implies a guaranteed demand for oil as a raw material, if current relatively low prices hold. Brazilian industrial projects focused on the petrochemical and fertilizer industries, for example, represent ideal opportunities to ensure that a significant and stable demand will exist for the oil and natural gas that will be produced in large quantities from the Brazilian presalt fields. That is one of the main lessons to be gained from the North American experience - strong growth in basic industries, driven by low oil prices, resulted in a vigorous renewal of general economic growth in the US, even starting from an already high GDP. This result defies the conventional economic logic for more developed countries, whose growth is expected to be more moderate, and it demonstrates the strong leveraging power of low oil prices.

Finally, given the heavy dependence of the Brazilian economy on road transport, as well as the large and diversified industrial base, the demand for oil, and automotive fuels in particular, will provide strong support for Brazil´s oil industry for a long time. The demand of a large and growing captive market at reasonable prices protects the health of the Brazilian oil and gas industry from potentially unfavorable international market influences, and cushions Brazil from the impacts of other world market conditions, such as the current low commodity prices for iron ore and other major export products. Implications for Petrobras – The new market paradigm also points to unexpected consequences for Petrobras, the major oil industry player in Brazil, which the investment community seems not to have adequately grasped, given the relatively dismal performance of Petrobras shares in the equity markets. Petrobras will likely realize a significant benefit to its bottom line, since it has been importing automotive fossil fuels in order to cover the refining deficit for these fuels in the country, and it has been doing so at a higher cost than its prices at the pump. In the same fashion, Brazil itself will also benefit somewhat from a positive effect on its balance of payments, as long as it must cover the current deficit between domestic production and consumption of oil and refined products. Since Petrobras foresees a continuing growth in its oil production in the coming years, that current advantage will become a disadvantage only when the country reaches overall self-sufficiency again. The risk of a possible restriction in the sources of financing for Petrobras, the most important Brazilian company and by far the leading oil company in Brazil, is seen as justifying a national policy dedicated to its defense, which Brazil is likely to implement. It must also be considered that there are profound differences between the operational conditions of Petrobras and OGX, for example. This recognition suggests that the failure of OGX will not impede measures to protect Petrobras. Its fundamentals are solid, both in relation to human resources within the company, and to the technological knowhow for operating in the areas where the giant reserves of the pre-salt region are found. The company also has significant physical resources to which, by law, it has preferential access 30% minimum participation as operator of all pre-salt fields - as well as being the major leaseholder in all current non-pre-salt exploration and production blocks in Brazil. These resources represent recoverable oil and gas accumulations that may reach between 115 and 288 billion barrels, considering only the pre-salt region (JONES & CHAVES, 2011). Possible appropriation of significant reserves by yearend 2015 is entirely possible, given the large inventory of discoveries and assets. These include assets

such as the transfer of rights areas, involving five billion barrels of guaranteed recoverable reserves, plus excess volumes, and other fields in the development stage that could have their reserves certified relatively easily. An increase in certified reserves is likely to change the current overly negative perception of Petrobras in the financial markets. In addition, the recent startup of its new refinery in the Northeast of the country (Refinaria do Nordeste - RNEST), Petrobras will immediately improve its cash flow going forward, and will reduce the negative impact of fuel imports that can now be produced by RNEST. The fundamental prospects for Petrobras are enviable, but are currently obfuscated by the political and governance crisis, which, despite not being a major threat to its operations, have hurt its share performance. World oil majors would likely be happy to have the problems that Petrobras is currently facing, if they could also have the same access to the immense reserves of conventional oil and gas, recoverable with available technology that it fully masters, such as ultradeep production. Many of these reserves are in fields that are already producing, with well productivities among the highest in the world. Conclusions – World oil players will have to deal with the fact that the current crisis in oil prices is not a price oscillation due to short-term market changes, as happened in 2008-2009. This is a structural crisis, with underlying factors that are not likely to reverse themselves in the near future, or be subject to physical, financial or political limitations. Potential responses by affected countries are also limited, which suggests that they can do little to reverse the current scenario. An analysis of the implications for individual countries suggests that the burden of losses in market share of world oil production and exports will be borne by countries other than the US, Saudi Arabia and Brazil. The combination of current market forces and Brazil´s likely policy response suggests that it will continue to build its oil industry, both in production and local content capacity. That production will prioritize conventional oil resources with favorable production and cost parameters, and will improve Brazil´s balance of payments, both in the short run and further out. With proposed changes to new pre-salt bidding rounds, there is likely to be significant competition in the future for major pre-salt blocks. Brazil would then be in a better competitive position in relation to other major oil and gas countries, such as Mexico. If, on one hand, new lower oil prices imply a delay of the development of Brazil´s unconventional potential, on the other hand the new market reality also implies a guaranteed demand for oil, as long as prices remain at T&B Petroleum 37

market

current levels. Industrial projects involving petrochemicals and fertilizers, for example, represent excellent opportunities to ensure that there will be a significant and stable demand for the natural gas that will be produced in large quantities from the pre-salt fields. The vigorous growth of the US economy, starting from an already high level of GDP, defies economic

logic for more developed economies, whose growth tends to be more modest. However, it also demonstrates the leveraging power of an energy policy focused on providing incentives to the domestic oil and gas industry. That is one of the main lessons that Brazil stands to learn from the recent US experience regarding oil and gas production.

References ANP, 2015. Boletim Mensal da Produção de Petróleo e Gás Natural – Dezembro 2014. Available at: http://www.anp.gov. br/?dw=73964, access on 15/02/2015. BRASIL, 2014. PAC2 – Programa de Aceleração do Crescimento. Available at: http://www.pac.gov.br/, access on 20/12/2014. CHAVES, H. A. F. C.; RODRIGUES, R.; JONES, C. M., 2012. Quais São as Perspectivas para o Brasil Desenvolver seu Potencial Não Convencional? Gas Summit Latin America 2012, Rio de Janeiro, Brasil. InformaGroup, 2012. DOURADO, J. D. A.; JONES, C. M.; CHAVES, H. A. F., 2010. Rumo a um novo modelo energético mundial, IBP-2925. In: RIO OIL & GAS EXPO AND CONFERENCE, 2010, Rio de Janeiro, RJ, Brasil. Anais...Rio de Janeiro: IBP, 2010. DOURADO, J. D. A.; JONES, C. M., 2015. Nova percepção do mercado de petróleo e gás no mundo e no Brasil. TN Petróleo, Special Edition 100, March, 2015. FERC – Federal Energy Regulatory Commission, 2014. North American LNG Export Terminals Proposed. Available at: http://www. ferc.gov/industries/gas/indus-act/lng/lng-export-proposed.pdf, access on 20/12/2014. JONES, C. M., 2010. Biofuels - new developments, new technology and implications. In: ARPEL Seminar: Regional responses to global challenges, Paramaribo, Surinam, 2010. Available at: https://www.arpel.org/library/publications/publication/file/648/download/, Access on 15/02/2015. JONES, C. M.; CHAVES, H. A. F., 2011. Assessment of yet-to-find oil in the Brazilian Pre-Salt region. SPE-143911-MS, Brasil Offshore 2011, Macaé, Brasil. Available at: https://www.onepetro.org/conference-paper/SPE-143911-MS, access on 20/1/2014. LUND, S. et al., 2013. Game changers: Five opportunities for US growth and renewal. McKinsey Global Institute report, July, 2013. Available at: http://www.mckinsey.com/insights/americas/us_game_changers, access on 15/02/2015. NYSVEEN, M., 2014. Production set to reach 15 MMboe/d in 2015. North American shale update, Oil&Gas Financial Journal, 17 Nov, 2014. Available at: http://www.ogfj.com/articles/print/volume-11/issue-11/features/north-american-shale-update.html, access on 20/12/2014. PEREIRA, G. C. R., 2012. Avaliação de Recursos de Petróleo Não Descobertos (Yet-To-Find-Oil) na Bacia de Sergipe/Alagoas. Monograph (Undergraduate Course Conclusion), Geology Department, UERJ. PETROBRAS, 2014. Plano Estratégico Petrobras 2030 e Plano de Negócios e Gestão 2014 – 2018. Available at: http://www.petrobras.com.br/fatos-e-dados/plano-estrategico-2030-e-plano-de-negocios-e-gestao-2014-2018.htm, access on 20/12/2014. PETROBRAS, 2015. Viabilidade econômica da produção no pré-sal: nota de esclarecimento. Available at: http://www.petrobras. com.br/fatos-e-dados/esclarecimento-viabilidade-de-producao-no-pre-sal.htm, access on 15/02/2015. RODRIGUES, R.; CHAVES, H. A. F. C.; JONES, C. M., 2012. Where may we find shale gas in Brazil? AAPG Geosciences Technology Workshop, 2012, Rio de Janeiro, Brasil. AAPG, 2012. Available at: http://www.researchgate.net/publication/257356108_WHERE_MAY_WE_FIND_SHALE_GAS_IN_BRAZIL, access on 20/12/2014. THE ECONOMIST, 2014. Sheiks v Shale. Available at: http://www.economist.com/news/leaders/21635472-economics-oil-have-changed-some-businesses-will-go-bust-market-will-be, access on 20/12/2014. TN PETRÓLEO, 2014. Produção no pré-sal ultrapassa o patamar de 700 mil bpd. Available at: http://tnpetroleo.com.br/noticia/ producao-no-pre-sal-ultrapassa-o-patamar-de-700-mil-bpd/, access on 15/02/2015. US EIA - US Energy Information Administration, 2013. Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States. Available at: http://www.eia.gov/analysis/studies/worldshalegas/, access on 20/12/2014. US EIA - US Energy Information Administration, 2014a. Petroleum & Other Liquids - Data - Europe Brent Spot Price FOB. Available at: http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RBRTE&f=D, access on 15/02/2015. US EIA - US Energy Information Administration, 2014b. How much does it cost to produce crude oil and natural gas? Available at: http://www.eia.gov/tools/faqs/faq.cfm?id=367&t=5, access on 20/12/2014. US EIA - US Energy Information Administration, 2014c. United States Total 2009 - Distribution of Wells by Production Rate Bracket. Available at: http://www.eia.gov/pub/oil_gas/petrosystem/us_table.html, access on 20/12/2014. US EIA - US Energy Information Administration, 2014d. Annual Energy Outlook 2014. Available at: http://www.eia.gov/forecasts/ aeo/pdf/0383(2014).pdf, access on 20/12/2014.

T&B Petroleum 37

E D N W VE UÉ O Q M EU N

Institutional support:

Produced by:

Discover Argentina’s Shale Reserves & Grow Your Business in Latin America

Co-sponsor:

23 - 25 June 2015 | Neuquén, Argentina Host Partner:

Principal Sponsor

Associate Sponsors

Workshop Sponsor

2015 Distinguished Speakers Include:

Gustavo Luis Bianchi

Alberto Saggese

General Director YPF Tecnología

President Gas y Petróleo del Neuquén

Alex Valdez

Joaquín Ramírez

To download the full brochure visit Director of Hydrocarbons Government of Neuquen & OFEPHI Representative

Unconventional Product Champion

latam.world-shale.com/en

YPF Tecnología

To be part of the product showcase or to become a delegate contact T&B Petroleum 37 63 Sébastien David on +44 20 7978 0080 or email latinshaleenq@thecwcgroup.com

local content

THE ENEMY WITHIN How indirect spend management impacts profit margins

As the global economy continues to sputter, careers stall and many companies continue to tread water, we obviously cannot just watch helplessly as economic conditions continue to compress and batter our profit margins with continually depressed revenue streams.

ut what can management do? As opportunities to bolster our Top Lines diminish, we need to focus intently and intelligently on the issues that impact the “Bottom Line” that can help us to mitigate the cash flow challenges, help expand profit margins and take advantage of emerging opportunities as others fail.

Frank Wilhelm is the President and Founder of “International Supply Chain Solutions” (http:// www.iscsglobal.com) a successful consultancy with an international reputation for profit elevation with major enterprises within many industrial and business sectors. Frank is a recognized thought leader in supply chain management having authored many articles and is frequently quoted in leading business journals.

T&B Petroleum 37

Hiding in plain sight – One of the biggest and most persistent negative contributors to the bottom line and a major opportunity for dramatic and positive impact lies in the area of “Indirect Spend”. Loosely defined; Indirect spend refers to purchases of goods and services that are not directly incorporated into a product being manufactured or service provided by the enterprise. This means that all enterprise expenses not directly associated with the product or service being delivered is considered an indirect expense and covers many areas such as; MRO, professional services, travel, supplies, leased vehicles and many more such categories. The impact on the enterprise by not addressing this situation not only adversely affects spend activity but also results in lost productivity! Indirect spend can account for 50% of the total spend for manufacturing companies and up to 90% for some non -manufacturing sectors. And yet 50% of all indirect items remain unused / inactive over any twelve month period. Over 80% of procurement resources are typically consumed acquiring indirect material. Once this phenomenon is discovered it is usually too late and the Bottom Line has already taken a big hit. But why the surprise, why is this activity undetected? How has it been able to fly under the radar for so long? In the current economy it is surprising to learn that companies are ignoring or missing opportunities like this which could contribute millions of dollars to their profit margins. As enterprises are being pressured more and more to combat rising prices and reduce costs in this slow growth period, it is curious that more companies have not aggressively addressed indirect spend. Most companies have taken good control of their direct material spend and supply chain activities and are reaping the benefits. So why it is that indirect procurement is so frequently neglected when it can have such an important impact upon the bottom line of a business?

Indirect spend has danced through time escaping the rigors, oversight and vigilance of traditional direct spend. There is generally no central focus or accountability. Indirect spend does not exist on Bills of Material or part of a centralized planning system such as MRP or ERP. There are usually no part numbers and an incongruent vendor naming convention. Indirect spend is dispersed throughout the organization and is subject to the influence and whims of many and varied individuals and organizations. Most control activity aimed at addressing this financial issue is ex post facto. From a central focus point of view the problem of excessive indirect spend is essentially hidden and once the problem has been discovered it is already too late! Beyond the embedded issues already presented there are other factors which contribute greatly to this problem of indirect spend management: • Rogue spending has perhaps continued for a long time, escaping scrutiny and has become institutionalized • Individuals feel empowered and will resist efforts to conform • “Special Relationships” with vendors may have formed • A general lack of commodity expertise • A lack of analytical capability • Unqualified vendors • Inaccurate or incomplete data • Unquestioned payment • Lack of coherent audit trails • Etc., etc.

Light at the end of the tunnel – The scope of the problem is great and the intricacies of the situation make an attack on the problem appear to be quite daunting, which may cause one to question is the effort really worth it? According to a study conducted by Michigan State University: Centralized focus on indirect spend will result minimally in: • 25% cost reduction • 50% improvement in lead times • 93% reduction in non-approved suppliers • 18% reduction in inventory

The rewards are great and the effort is definitely worth it! The question is how to go about harvesting this potentially great cost savings? The reality is that nothing can occur without a clear corporate mandate, strong leadership a coherent strategy and active participation. In practice, there is no easy way to do this as the effort is intensely manual. Since, as previously indicated, there is no central focus or repository of data, the hunt for data is essentially boundless requiring dogged patience and perseverance. A singular body of data does exist but lies in many disparate places such as: cost center reports, accounts payable / disbursement files, actual “hard copy ” purchase orders, purchasing / payable audit trails, capital projects, chart of accounts, system error reports, transaction files etc., etc. Beyond the obvious mechanical and analytical problems, there is an emotional component that is pervasive throughout the enterprise. Individuals view indirect spend activity as almost a private rite and will resist any attempt at what they perceive as an intrusion into the running of their domain. Perhaps in no other area are emotions so easily aroused. For these reasons it is almost always necessary to have a “fresh set of eyes” from outside the organization to conduct an initiative of this nature and magnitude. Stop feeding the beast – Companies that do not act on indirect spend issues are ignoring or missing opportunities that could contribute millions to profits. The challenge, of course, is to stop the offending behaviors and institutionalize the necessary administrative and organizational adjustments to control indirect spend and prevent the accumulation of unnecessary cost and margin compression. How to accomplish this depends upon each company’s unique situation but World-class procurement organizations take an integrated, end-to-end approach and make the commitment needed to develop internal stakeholder relationships aimed at attaining maximum indirect spend control under management and this requires the right mix of technology, people and processes. It is time to effectively respond to economic conditions, act against the status quo and address indirect spend directly. T&B Petroleum 37

coffee break

View of Ilha das Cobras, downtown and Sugar Loaf, c. 1921

First poses.

T&B Petroleum 37

by Orlando Santos

Central Avenue, today Ave. Rio Branco, a year after the inauguration of incandescent lighting installation, 1906 Photos: Collection Moreira Salles Institute

View taken from Corcovado, 1906

Aerial view of the Praça Mauá and Ave. Rio Branco, c. 1921

indicadores meeting tn

May

4 to 7 - USA OTC 2015 Local: Houston, TX Phone: +1.972.952.9494 Email: meetings@otcnet.org www.2015.otcnet.org

20 and 21 - England 6th FPSO Vessel Summit Local: London, England Phone: + 44 (0)20 3141 0612 Email: jsmith@acieu.net www.wplgroup.com

September

23 to 26 - Brazil Brasil Offshore Local: Macaé, RJ Phone: + 55 11 3060 4742 Email: brasiloffshore@ reedalcantaranews.com.br www.brasiloffshore.com

July

22 to 24 - Brazil Rio Pipeline 2015 Local: Rio de Janeiro, RJ Phone: + 55 21 2112-9080 Email: eventos@ibp.org.br www.ibp.org.br

October

01 to 03 - India GRPC 2015 Local: Greater Noida, Delhi Phone: + 91 9711433168 Email: grpc@itenmedia.in www.refpet.com

August

27 to 29 - Brazil OTC Brasil 2015 Local: Rio de Janeiro, RJ Phone: + 55 21 2112-9080 Email: otcbrasil@ibp.org.br www.ibp.org.br

November

CMY

25 and 26 - Brazil Rio Automação 2015 Local: Rio de Janeiro, Brazil Phone: + 55 21 2112-9080 Email: eventos@ibp.org.br www.ibp.org.br

10 and 12 - Brazil 7TH CCPS Local: Rio de Janeiro, Brazil Phone: + 55 21 2112-9080 Email: eventos@ibp.org.br www.7ccps.com.br

04 and 05 - USA 7th FPSO Vessel Conference Local: Houston, TX Phone: +44 (0) 203 141 0623 Email: cwilliams@acieu.co.uk www.wplgroup.com

11 to 13 - Brazil Marintec South America Local: Rio de Janeiro, RJ Phone: + 55 11 4878 5990 Email: info@ubmbrazil.com.br www.marintecsa.com.br

17 to 20 - África do Sul NGV 2014 South Africa Local: Johannesburgo, África do Sul Phone: + 54 11 4300 6137 Email: info@ngv2014southafrica.com www.ngv2014southafrica

June

01 to 05 - France WGC Paris 2015 Local: Paris, France Phone: +33 (0)1 80 21 08 03 Email: dpaccoud@wgc2015.org www.wgc2015.org

Send your release to: tnpetroleo@tnpetroleo.com.br 68

T&B Petroleum 37

opini達o

T&B Petroleum 37

feiras opinion e congressos

by Ernani Filgueiras, Downstream, Petrochemicals and Biofuels Executive Manager, Brazilian Petroleum, Gas and Biofuels Institute â&#x20AC;&#x201C; IBP

Brazil opportunities in

SURF Engineering

The oil and gas sector has been experiencing a new reality since last year. We have witnessed the emergence of new markets, the fast development of unconventional resources and the fall of oil prices worldwide. It is a scenario that still requires understanding and that presents us with challenges, not only in the regulatory, logistics and training areas, but also in the development of low-cost technologies that enable greater efficiency.

ut, specifically in the Brazilian case, we see that the current situation offers as a great opportunity. The oil and gas industry thinks in the long term, and the crisis faced nowadays does not mean that companies will stop investing. Therefore, the chance to show that we are attractive to investments is in the countryâ&#x20AC;&#x2122;s hands. The pre-salt, for example, has a huge potential to develop an entire production chain. And, among the areas, the subsea pipelines comprise one that stands out in particular, the SURF (Subsea, Umbilicals, Risers and Flowlines) Engineering. Currently, Brazil is the main global user of flexible lines and has become a benchmark in the testing and development of technologies in this segment. All the large companies operate in the country. A recent study produced by Quest Offshore, an American consulting company specialized in oil and gas area industry, indicates that Brazil will require the installation of 8,000 km of deep-water subsea pipelines in the coming years, only to meet the pre-salt production. This volume will account for 19% of global demand and an increase of 79% over the volume of subsea pipelines installed nationwide between 2006 and 2011. Moreover, according to the study, the Brazilian demand in this will account for 93% of the offshore industry demand in South America. Thus, the expectation is that new suppliers are attracted to

T&B Petroleum 37

Brazil, in order to meet the growth in the oil and gas industry and the resulting increase in the pipeline network. A taste of the strength of this market can be seen in one of the main events of this sector in the world: the Rio Pipeline Conference & Exposition. From September 22 to 24, the industry will get together in Rio de Janeiro, to debate the importance of subsea pipelines in the pre-salt development. The last edition of the event, held in 2013, received more than 2,200 visitors and about 1,000 attendees. In the exhibition, more than a 120 companies presented new technologies and services that will be applied in the oil & gas industry in Brazil in the coming years. The Rio Pipeline Conference & Exposition, which started 20 years ago under the major investments in the country in the onshore pipeline sector, reaches its 10th edition consolidated as a major forum to carry out business in this area. That is where the novelties are presented and where matters of interest to the industry are discussed in the safety and technology fields, among others. Therefore, those who work with subsea lines have to not only keep an eye on Brazil, but also need to follow the news of the event. After all, the entire pipeline community will be attending, and there is where things will happen.

Promoted by:

Rio de Janeiro | Brazil

RELY ON WHO IS ALWAYS WITH THE INDUSTRY TO OVERCOME THE CHALLENGES OF THE OIL AND GAS SECTOR.

TECHNOLOGY AND INNOVATION SOLUTIONS

PROFESSIONAL TRAINING

OCCUPATIONAL SAFETY

Sistema FIRJAN, the Federation of Industries of the State of Rio de Janeiro, is your strategic business partner in the state of Rio. Working closely with the industries, Sistema FIRJAN is ready to offer customized solutions and technical information for your company to be more competitive in the oil and gas sector particularly. Sistema FIRJAN maps investment opportunities, improves local business environment and through SESI and SENAI provides solutions in technology and innovation, professional training and occupational health and safety services. With us, your company boosts productivity and overcome market challenges.

Contact us at oil.gas@firjan.org.br | www.firjan.org.br/oilandgas Visit our booth in the Brazilian Pavilion at OTC Houston.