Brazil keeps its position on the foreign investor’s radar

Above, left to right: Helle Moen (Innovation Norway), Clarisse Rocha (EIC), Matt Woods (UKTI), Arthur Orlando (Business France) and Rafael Lourenço (AmCham Rio)

Above, left to right: Helle Moen (Innovation Norway), Clarisse Rocha (EIC), Matt Woods (UKTI), Arthur Orlando (Business France) and Rafael Lourenço (AmCham Rio)

In the face of it all, Brazil should see to making amends and re-gaining the supplier’s confidence, and of all those who are on the lookout for markets with greater foreseeability.

The petroleum industry worldwide has seen better days, before the steep fall in oil prices; and the situation in Brazil seems to be even more discouraging due to the political and financial crisis which has taken a hold over Petrobras. So as to gain insight on foreign investor’s views on this topic at this delicate time, Brasil Energia Petróleo e Gás has spoken to representatives from various international development agencies located here in Brazil. Despite the hurdles, they state that the country keeps up its position as an attractive location to foreign investors, and all those who keep their eyes peeled for opportunities in the EPC segment. Nevertheless, it will be necessary to regain supplier’s confidence, who in the face of a lack of foreseeability in Brazil, may consider a move to other markets.

In this delicate time which the oil segment is going through in Brazil, have you noticed a slow-down in foreign companies’ interest towards Brazil?

Rafael Lourenço (AmCham Rio): When considering the application of their investments, oil and gas companies take into consideration political risk, economic background and, of course, the price of oil on a global level. American energy companies which operate in this same line of business, have the resources to invest and the interest to widen their participation in the foreign market. Generally, these companies look at Brazil as an attractive spot for their oil and gas investments, a position which it has gained for itself since 2008. This year’s challenge is to win over investor’s confidence once again.

Arthur Orlando (Business France): Despite the problems faced by Petrobras and the whole production chain, we have noticed that French suppliers still hold a discreet interest in the Brazilian market. We still do receive a number of requests for information asking for more information and market analysis. Let’s just say that between January and April 2015 we welcomed a minimum of eight French companies, each coming to Brazil on an individual business mission. Just consider that, despite the current scenario, this has been greater than the number of business missions we had lined up at this same period last year, when we only had about three companies who were checking out commercial viability in Brazil.

Matt Woods (UK Trade & Investment): British companies’ interest has certainly not decreased. Brazil goes on being a promising country, with a promising growth potential. At the time being, within the oil and gas sector we have 120 British companies, both small and big companies, all of which are quite active. Apart from that, the two major investors in Brazil are indeed British: Anglo American and BG. Both these are not new to the market here, and will not quit on Brazil any time soon. The pre-salt discoveries have brought on excellent prospects for the Brazilian economy in the long-term. This has been indeed the greatest oil discovery in the Western hemisphere in the last 40 years, estimated at 50 billion barrels, and also a great opportunity for British companies, as these are valuable partners for Brazil in the exploration of the pre-salt, as they contribute in expertise gained in the North Sea and cutting-edge technology.

Clarisse Rocha (Energy Industries Council): Some businesses have stated that it is right in the moments of crisis that we should opt to be closer to the market. Additionally, given the current oil scenario worldwide, the British have understood that it would be even more necessary to have an international hinge and diversify its portfolio. Though we are worried about the repercussions of the current situation we’re in, there still holds great potential in the market, as is the case in the maintenance segment, which keeps attracting the interest of many.

Helle Moen (Innovation Norway): Surely, considering Petrobras’ participation and influence in the Brazilian energy market, there is great preoccupation amongst Norwegian companies as to the situation in the country. Some of these suppliers, mainly the bigger ones, have a long-term strategy for Brazil and have accepted the fact that they are bound to go through high’s and low’s during their stay here. As to the smaller companies, which offer crucial technologies to the industry, they do require greater foreseeability and transparency in the market, whilst also depending on a constant cash flow to support their R&D for products so their activities may continue to move on. Until such time when Brazil may go back to having greater market foreseeability, solutions may not be readily available, and these companies would have to cut down on the risk and thus be bound to focus their risks in other regions.

We all know that big economic groupings have been labelled as forming part of the corruption scandals, and this could be a door-opener to international EPC’s. Are foreign companies aware of this market opening?

Rafael Lourenço (AmCham Rio): Yes. Foreign companies are aware of the opportunities which this sector offers. The Brazilian market is an interesting one, and should there be an opening, international organisations will surely be willing to participate, including American ones.

Arthur Orlando (Business France): Out of the eight companies which are set on visiting Brazil, one operates in the marine and offshore engineering. During its stay here it is keen on identifying a local partner which would be willing to strengthen its position in the market-segment by forging an international partnership. And this is not the only company with such a vision, other companies have already taken preliminary moves in this direction. Perhaps the time has come for Brazilian companies with a basis in technology to go international, thus allowing them to survive the crisis which has overcome the local market. This could be the next workload for Business France in the coming years.

Matt Woods (UKTI): From the foreign investor’s point of view, this is surely a good opportunity for us. British companies are highly interested and can surely respond to the Brazilian demand, as these are technologically equipped and count on great expertise and professionals for this end. Just in the last two years, we have helped British companies to generate approximately BRL7bi in the energy sector. This has been the most successful prosperity campaign which the British Government has seen in Brazil to date. Some of the British engineering companies are already operating in Brazil, such as Amec, Wood Group and Harris Pye, all of which have office representations in Rio de Janeiro.

Clarisse Rocha (EIC): Some of the British companies have already received project requests from Asia with a view of destination bound for Brazil. We hope that these opportunities come to the fore, both for the suppliers, as for the EPC’s and British engineering companies, which have already shown an interest in the Brazilian market, such as AMEC Foster Wheeler, Wood Group and Petrofac.

Helle Moen (Innovation Norway): Norwegian companies are open to all business opportunities, but this new opening has not been so decisive to engineering companies. Business groupings have understood the importance of the “local content” rules and are trying to adapt to them. Indeed, this process has proven to be challenging, most especially for smaller companies. We have already seen micro companies which are heavy in technology, having to give more attention to administrative questions rather than to the development of products. This could work out for some time if the market truly proves to be attractive, but long-term it might turn out to be unsustainable.

Original article published in Portuguese on Brasil Energia Petróleo e Gás by João Montenegro, on 06th March 2015.

Translated by Inventure Management:

Innovation Norway is responsible for promoting the Norwegian industry abroad. Our office in Rio de Janeiro manages Innovation House Rio, our business incubator office, and helps Norwegian companies in their efforts towards the Brazilian market.

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