The Heart of the Matter

-- FROM THE FULL PICTURE MAGAZINE -- BW Offshore entered the Brazilian offshore oil production market in 2008; only two years later the company is an established player stepping up its local recruitment and building relationships across the region.

"If you had failed, we would have failed. The heart of an FPSO is the control system, and BW Cidade de Sao Vicente's control system is from Kongsberg. Stakes were high, and it's been a success. The FPSO's up-time is close to 100 percent," says BW Offshore's director in Brazil, Jon Harald Kilde.

The Full Picture magazine met Kilde at the company's Rio de Janeiro office (one of three in Brazil, along with operational offices in Santos and Macae). He has led BW Offshore's efforts in Brazil since it opened an office there in 2008, only one month before the company won the initial contract with Petrobras for the FPSO 'BW Cidade de Sao Vicente' (BW CdSV).

The contract itself was of a modest size, but its significance wasn't. Following the discovery of the huge oil deposits in Brazil's pre-salt Tupi field, Brazil's national oil company Petrobras had promised the Brazilian government to begin producing the oil within one year. Given the typical three to ten-year lead-time needed to engineer, build and start-up production units, this was no modest promise.

"We had an FPSO available that needed some modifications to suit life as a pre-production and testing FPSO at the deepwater Tupi field. We were able to deliver it in 11 months and it was pivotal in allowing Petrobras to live up to its promise," says Kilde.

You can't buy the kind of goodwill BW Offshore earned from this delivery. Early in 2010, BW Offshore together with its Brazilian partner QUIP won its second FPSO contract with Petrobras and partner Chevron for their Papa Terra field production. The company has signed contracts for adapting the first FPSO (OSX-1) of Brazil's hardcharging independent player OGX, to its first oilfield Waimea.

The prodigious start with BW CdSV may have long-term repercussions for the company, as Brazil's deepwater fields and low level of pipeline infrastructure mean more than 40 new FPSOs will join the 25 already operating there over the next decades. Along with Petrobras and OGX, international oil companies like Anadarko, Shell and ExxonMobil are investing heavily in parcels of Brazil's offshore fields. OGX's official plans include 19 FPSOs to develop their 22 oil fields/blocks. Nationalised challenges

For BW Offshore, the biggest risks to its Brazilian endeavour are political and organizational. While Kilde lauds the Brazilian oil regulators as professional and easy to work with, the potential for changes at the top and the uncertainty that goes with it creates some concern.

"Brazil has established stringent requirements for local production. At the same time, it has laid an ambitious path for ramping up oil production. This leads to some interesting paradoxes; Petrobras convinced the national government in one instance to allow them to look abroad for conversion projects because domestic sourcing would not have met the required delivery times," says Kilde.

Current rules require "65 percent" of offshore deliveries to come from Brazil, but this ratio is subject to some imaginative mathematics. In reality, most projects' Brazilian content is in the 35 percent range - a figure Brazil's government is trying to push up to at least 50 percent. With BW Offshore's big plans in Brazil, this means it must put a greater focus on recruiting and sourcing inside the country.

"We've had to reach out to schools in order to ensure we get a supply of skilled Brazilians that matches our plans here. We have an obligation to ensure that at least 80 percent of BW CdSV's personnel are Brazilian. We work with universities, technical schools and Brazil's merchant marine training institution (CIAGA)," says Kilde.

Along with people, BW Offshore will need to secure a good supply of equipment from inside the country. This brings us back to the comments about Kongsberg. "The advice I would give to Kongsberg is to continue investing in its strong local presence. Relationships and continuity are valued very highly in this market," says Kilde.