Brazil: A Hard Nut to Crack? by Keith Mackie, Operations Director, ITF


posted 23 Dec 2014

Keith Mackie, Operations Director, ITF

It seems obvious that there needs to be a clear business reason for doing anything new, and in the case of ITF as a member-led organisation, there very definitely needs to be a demonstrated ‘pull’ for us to even examine the benefit of doing something that can potentially consume valuable time, resource and money. Take working to establish the requirement of an ITF presence in Brazil for instance. 2½ years ago, I’m probably ashamed to say my experience and knowledge of Brazil was limited to growing up watching a conveyor belt of gifted footballers grace World Cups, marvelling at the Rio Carnival and Amazon Rainforest and drinking strong coffee. Quite predictable I guess, but to many oil and gas industry professionals who over the past few years have made the journey to Brazil from the UK in expectation of taking advantage of the opportunities presented, they may have experienced a different perspective of Brazil. Yes, football is all around you and yes the beaches are packed all year round with sun worshippers, but Brazil is about so much more - a multicultural country that has enormous resource wealth and is working on building the necessary infrastructure to exploit this fully. Many have made the roughly 6000 mile journey from the UK, tried, failed and left, but many others have tried, succeeded and stayed and are successfully growing their business. However, without exception I would imagine that a great deal of effort (that would be the ‘time, resource and money’ thing again!) would have been expended in getting to that point, and potentially in greater multiples of magnitude than they ever initially estimated.

Two specific opportunities continue to encourage UK companies such as ITF to explore Brazil as a viable and productive business opportunity. Firstly, when Brazil first announced “pre-salt” oil discoveries in the Brazilian Continental Shelf back in 2007/2008 with predicted reserves of over 50 billion barrels of oil, significant opportunities opened as a consequence. However, although pre-salt oil is of good quality, its deep water location under thick layers of salt mean that large scale investment is required to extract it. Joint Industry Projects may be one mechanism for effectively and collaboratively exploiting these opportunities.

Secondly, the Research and Development production ‘levy’ regulated and monitored by the Brazilian oil and Gas regulatory body (ANP) opens up these new areas to explore. The levy is a legal requirement stating that all oil companies operating in Brazil must allocate 1% of their production revenues for local research and technology development activities. Half of the 1% must be spent on university research and the other half can also be spent on university research or on the operating companies’ own research and development activities. Identifying and facilitating collaborative technology projects is essentially ITF’s core business, and therefore always going to be an area of interest to us. Through the running of a proof of concept Produced Water Challenges Call activity, ITF is already actively proactively working towards providing our Members with levy-compliant technology projects to sponsor, in this case directly with Brazilian universities. The first project coming through the process has already been submitted to ANP for approval, with the second one following closely behind in early 2015.

The above opportunities coupled with the fact that many of the ITF Members are already based in Brazil, make evaluating investing our time and resource in Brazil an interesting proposition. Language and cultural challenges, cost of operating in country and an intense administrative overhead do add their own unique complexities for any company with a UK Heritageconsidering setting up in Brazil, but those complexities also serve to make it a fascinating and challenging place to work. Although creating an ‘ITF do Brasil’ will undoubtedly prove a difficult process, just as Rome wasn’t built in a day, Brazil won’t be easily and quickly developed by ITF overnight. But rest assured that ITF is committed to fully evaluating and developing the presented opportunity and we’re more than up for the challenge.

 

 Keiths Signature

 

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