--FMC Technologies boosting Brazil production capacity to meet
offshore demand
--Subsea equipment manufacturer has invested $200 million over
past five years
--Brazil needs to attract more oil investment, head of FMC's
local unit says
By Jeff Fick
RIO DE JANEIRO--Subsea-equipment manufacturer FMC Technologies
(FTI) is investing in Brazil to meet growing demand for the
company's offshore oilfield products, while also confronting the
challenge of developing its own supply chain to adhere to stringent
local content rules, the president of the company's local
operations said in an interview.
FMC Technologies has invested $200 million over the past five
years to ramp up output of products such as wet Christmas trees, an
ensemble of underwater pipes and valves designed to manage the flow
of oil and natural gas from a deep-water well, and other pieces of
equipment that help get oil from the sea floor to platforms on the
surface, said FMC CBV president Nelson Leite during the Rio Oil
& Gas 2012 conference.
"Brazil is an important market," Mr. Leite said, noting that
about 50% of the country's offshore oil production passes through
FMC equipment. The company holds an 80% market share in underwater
manifolds and about 35% of the wet Christmas tree market, Mr. Leite
said. Earlier this year, FMC inked a $1.5 billion deal to make up
to 130 of the Christmas trees for pre-salt fields operated by
Brazilian state-run energy giant Petroleo Brasileiro (PBR,
PETR4.BR), or Petrobras.
Development of the pre-salt fields, a cluster of deep-water
discoveries made of the coast of Rio de Janeiro and Sao Paulo
states that holds billions of barrels of crude, has forced the
company to increase its production capacity compared with just a
few years ago, Mr. Leite said. While that means more sales and
revenue, rules that require an ever-increasing percentage of the
goods and services to be sourced locally also means more work
developing the company's supply chain, the executive added.
"I talk about increased volume because of the pre-salt, but the
supply chain has to be prepared for [the increased volume]," Mr.
Leite said. "That's the big challenge for the industry."
FMC has put a lot of effort into ensuring that its suppliers
have the capacity to deliver production materials, Mr. Leite
said.
"Our strategy is to achieve high local content on budget, on
time," the executive said.
One of the key areas that has helped is a financing program
started by Petrobras in June 2011, called Progredir, Mr. Leite
said. Progredir makes low-cost financing available to Petrobras's
suppliers, especially small and medium-sized companies further down
the supply chain that typically face greater financing costs.
Progredir "is helping. It's helping our suppliers," Mr. Leite
said. FMC's deal to provide wet Christmas trees to Petrobras was
made part of the program, allowing FMC's suppliers to use the
contract as a basis for financing, the executive said.
"We need more" programs like Progredir, Mr. Leite said. "The
biggest part of costs for small companies is the cost of
financing."
Mr. Leite also said that Brazil needs to continue to attract
investment from overseas oil companies and service providers to
quickly develop the country's petroleum riches. Brazil took a step
in the right direction late Tuesday, when the government announced
that the long-delayed 11th-round concession auction would be held
in May 2013 pending approval of a new oil royalties law by
Congress. The first auction of government-held subsalt fields is
expected in November next year.
"To develop fast, [Brazil] needs all of the oil companies to
come here," Mr. Leite said.
While Mr. Leite declined to comment on the impact of the
Brazilian real's recent depreciation against the U.S. dollar, he
indicated that recent efforts by the government and Brazilian
Central Bank to curtail foreign-exchange volatility were positive
for the business community.
"A stable currency is far and away better than a currency that
is going way up or way down," Mr. Leite said.
-Write to Jeff Fick at Jeff.Fick@dowjones.com
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