Controlled Growth for Brazil´s O&G Development

Dec 07, 2010, 8:18PM EST
Controlled Growth for Brazil´s O&G Development
With the final voting of the new regulatory model for Brazil´s O&G market, Petrobras confirms it will control local development in order to let local industry catch up to the demand.

The Brazilian O&G market development speed is directly dependent on the shipbuilding industry and the specialized equipment and services industry. The hard truth is that none of these local supporting industries are presently capable of supplying the Brazilian O&G demand and it is clear that it will take quite a few years for the local industry to catch up to this demand, even then in many cases, such as shipbuilding, this accelerated growth will only be possible through partnerships with leading international shipbuilders.
These partnerships could also be necessary for an accelerated development of the local subsea equipment and services industry, which is slowly taking shape. However the massive investment being made in technological research and development in Brazil, by local companies and also foreign companies in the O&G industry through leading local universities may also influence the development of various local support industries.
The fact is that this policy of waiting for the local industries to catch up is crucial, even if unfortunate, as the consequences of accelerating the Brazilian O&G development, including the pre-salt, without the local industry development keeping pace, would be highly detrimental if not fatal to the local support industries and would risk a local industry collapse as has been seen in Mexico and Venezuela.
Leaving all the politics aside, this Petrobras policy, undoubtedly supported by the late and the new nationalistic Brazilian government, is fundamentally sound and responsible. It doesn´t even curtail foreign companies selling their products and making their profits, as much of the present demand simply cannot be supplied by local industry at this moment and the expected future demand is also so high as to permit foreign companies to continue building their order books from the Brazilian O&G and shipbuilding industries, even with an expanded local content policy and massive workforce training efforts. Many foreign companies looking for long term profits are investing in partnerships with local companies and growing roots in Brazil.
Claudio Paschoa
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