T&B Petroleum

The Brazilian TECHNOLOGY and BUSINESS Magazine of Oil, Gas, Petrochemical and Biofuels

opinion

Year XI • Issue 29 • September 2010 • www.tbpetroleum.com.br

It’s time for the pre-salt and the small oil and gas producers, of Haroldo Lima, General Director of the ANP – National Agency of Petroleum, Natural Gas and Biofuels

Steel for the pre-salt Rio de Janeiro gets three new steel factories Forship – The engineering of commissioning 11º Energy Summit – The future energy market

special: business plan 2010-2014

Petrobras to invest

US$ 212bn in Brazil

Special interview

John Forman Milne Albuquerque, Vice-president of HRT Oil & Gas

Back to Eldorado Protecting new technology, by Saulo Murari Calazans Pre-salt: concession, production sharing and power of contractors, by Antonio B. A. Sarmento So far, so close, by André L. P. Teixeira, Bianca de S. Lanzarin and Tiago Guerra Machado Single-pour/single pass loading, by Ricardo Portella and Luiza Andrade

special interview John Forman Milne Albuquerque, Vice-president of HRT Oil & Gas

Eldorado Back to

That is black gold that HRT Oil & Gas will be prospecting in the Amazon region, which had been called ‘Eldorado’ during another political era.

“The Solimões Basin has very good potential”, affirms geologist from the state of Pará, John Forman Milne Albuquerque, the vice-president of Brazil’s newest oil company, acquired by HRT in the third quarter of the year, when talking about the 21 exploration blocks in the Solimões Basin, which adds up to 48.000 km².

“WHY IS THERE SUCH GOOD POTENTIAL? Geology is a curious thing, because it works with correlations. If we look back at the geological evolution of the region, and remember that the continents had once been connected, we see that this basin has a correlation with the north of Africa. And what do we have there?

Oil and gas in great quantities”, explains the executive, hours before beginning the quiet period required by the Brazilian securities regulator, the Comissão de Valores Mobiliários (CVM), of any company before an initial public offering.

The ex-director of the National Oil, Natural Gas and Biofuels Agency (ANP) is betting on a successful IPO, despite taking place at the same time of a similar process at Petrobras. “We hold the second largest concession area in Brazil.

by Beatriz Cardoso

With just one-third of our area assessed, we already have more than 2bn barrels”, highlights Forman.

“Not to mention the potential of the two blocks in the deep waters off the coast of Namibia, which the company holds directly, and three more in which the company holds 40%”, adds the geologist specialized in mining geology with a MSc from Stanford University.

The first international concessions of HRT are located near the Kudu field, where 1.3 trillion cubic feet of natural gas has been discovered. The company has also picked up two blocks in Namibia by acquiring Lábrea Petróleo, which has a 10% participation in four onshore concessions. Confirming its bet on high-potential areas, despite the risks, HRT plans to intensify its operation this year: full gas ahead!

TB Petroleum – The quiet period is about to begin for HRT, as stipulated in the regulation of IPOs. What are your company’s expectations?

John Forman – When HRT O&G was founded last year, there was already talk of an IPO in order to position our investors. We are working to get the IPO ready for the September, when we will evaluate whether or not the market has any appetite for this IPO.

WE HOLD THE SECOND LARGEST CONCESSION AREA IN BRAZIL. WITH JUST ONE-THIRD OF OUR AREA ASSESSED, WE

What are the advantages to taking the HRT O&G public at this time in which Petrobras is doing the same?

We have important assets in the Solimões Basin, the largest producing onshore basin in the country (and the second biggest in natural gas), as well as offshore assets on the coast of Namibia [HRT has acquired a 40% stake in conces-

ALREADY HAVE MORE THAN 2 BILLION BARRELS.

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business plan 2010-2014

With US$ 118.8bn in resources for the E&P area and US$ 73.6bn for downstream, Petrobras reinforces its strategy to increase oil and gas and derivatives production with higher aggregate value in its Business Plan 2010 – 2014.

Of the total budget of US$ 224bn, projects in Brazil alone will take up US$ 212.3bn, with a potential level of contracting of US$ 28.4bn within the country.

US$ 212bn

by Maria Fernanda Romero

Photos: Petrobras Agency

in Brazil

AS HAD BEEN EXPECTED, the Exploration & Production Area (E&P) will receive more than half of the investment foreseen in the Petrobras Business Plan 2010 - 2014: with US$ 118.8bn, representing 53% of the total US$ 224bn in resources, allocated to projects in Brazil and abroad.

The amount is 14% higher than the investments estimated in the previous business plan (20092014). The second highest budget goes to the Supply Area (with encompasses refinery, transport and commercialization), which will receive US$ 73.6bn, or 33% of the total budget.

Investments in new projects amount to US$ 31.6bn (a little more than 14% of the total), with E&P receiving 62% (US$ 19.7bn); Gas and Energy with 21% (US$ 6.5bn) and Supply with 16% (US$ 5.1bn).

In Business Plan 2010-2014, there was a reduction of US$ 17bn in scratching and redefining other projects and adding 155 new endeavors. The president of Petrobras, José Sérgio Gabrielli, confirmed

that, in all, 686 large-scale projects are part of the current planning for 2010 - 2014. In the previous plan, the forecast had been for 531 largescale projects – each one with more than US$ 25m.

Revised production In Business Plan 2010-2014, the target production for both Brazil and abroad by 2014 is 3.9m barrels of oil equivalent per day, representing an annual growth of 9.4% the these four years, on a basis of projected for 2010 of 2.7m barrels.

Of the total forecast for 2014, there will be 2.9m barrels of oil from Brazil, of which 152,000 are

from the pre-salt reserves. Another 623,000 barrels will be natural gas extracted domestically, and the remaining 304,000 barrels from oil and gas from abroad.

By 2020, Petrobras expects to reach an average daily production of oil equivalent of 5.4m barrels, representing and annual increase of 7.1% on the expected 2010 basis.

Domestic production will contribute 4m barrels of oil (1.2m from pré-salt) and 1.1m barrels of natural gas to this amount. Foreign oil and gas production should reach 323,000 barrels by the end of the decade.

According to Mr. Gabrielli, the reduction of 318,000 boe in the total projected production by 2020 when compared to the previous plan is due to a revision in the company’s international goals in light of the revision of future investments for the current E&P strategy of Petrobras. “The targets presented only take into consideration the current projects in our portfolio and reflect neither the potential production from the Paid Assignment nor other projects of the new regulatory framework”, he added.

Technological challenges As part of the new plan, Petrobras has allocated resources to meet technological challenges, operational safety and human resources. In the Health, Environment and Safety Area (HES), US$ 3.3bn will be invested; US$ 2.9bn

Petrobras Business Plan 2010-2014

Pre-salt investment In 2010-2014 (US$ 33 bn)

Investiment: US$ 224 bn Distribuition (1%)

US$ 2,5 Petrochemicals (5%)

US$ 5,1

Biofuels (2%)

US$ 3,5

Infraestructure (2%)

US$ 0,9

Corporate (1%)

US$ 2,8

Exploration (13%)

US$ 4,3

G&E (8%)

US$ 17,8

E&P (53%)

Development (78%)

US$ 118,8* Downstream (30%)

Art: T&B Petroleum

Petrobras to invest

US$ 27,8

*US$ 33 bn (Pre-salt) US$ 75,2 bn (Post-salt)

US$ 73,6

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Photo: Cortesy Usiminas

steel industry

Steel

for the pre-salt

by Cassiano Viana

The US$ 224bn Petrobras Business Plan – US$ 30.9bn budgeted for the pre-salt and US$ 77.3bn for the post-salt – has tremendous impacts along all areas of the nation’s production chain. But it is in the steel industry where some of the most visible effects can be seen as a result of such an investment outlook.

PETROBRAS’ CURRENT projects alone – not including the pre-salt development projects – will demand 4m tons of steel by 2015. All this steel will not only take the form of ship hulls, platforms, drill rigs, but also in tubes and other equipment.

In tubes alone, Petrobras’ current assets will demand 911,940

tons of carbon steel, stainless steel and connectors. Platforms will take up 832,000 tons, while ship hulls will require another 656,850 tons.

The pre-salt will have consumed something around 1.9m tons of steel between 2009 and 2017; however, this figure could, and should, increase.

Yet another 680,000 tons of steel will be needed to meet the demands of constructing the 49 vessels of the National Petroleum Fleet Modernization and Expansion Program (Promef).

With all this expected demand, the domestic steel companies are investing in new technologies and re-evaluating processes and even their current production infrastructure – everything in order to meet the demands of their clients in the Brazilian oil and gas market.

The demand from pre-salt exploration, for example, will guarantee the scale to develop new stainless steel products in Brazil.

“The pre-salt will bring with it other scales of production. It is an opportunity to consolidate the inoxidable steel market for the Brazilian oil and gas market”, states Paulo Roberto Magalhães Bastos, the directorpresident of ArcelorMittal Inox Brasi l, dur ing the 65th International Congress of the Brazilian Association of Metallurgy, Materials and Mining (ABM), held in Rio de Janeiro at the end of July.

“They are well known technologies used in other markets, but now they can be brought to Brazil, where previously there had been no scale for production”, he explains. According to Bastos, the inoxidable steels that are more resistant to corrosion are already

being used in refineries, since they are used to process oils with a higher corrosive degree than in the past. “The pre-salt should also increase the demand for duplex steels”, he says.

The nation’s biggest producer of plain-carbon steel at 7m tons, Usiminas hopes to increase production capacity by 3m tons in the next two years, reaching 10m annual tons.

“We have an investment forecast of US$ 7bn. From this total, 4m will be allocated for the oil and gas segment, making it possible – among other projects – a new line of hot lamination that should be up and operating in the middle of 2011, as well as a new process of fast cooling to come this August, in partnership with Nippon Steel, which will allow us to produce steel of the highest technology and most widely utilized in the presalt, increasing the production of thick slab steel by 2012”, explains the company’s vice-president of businesses, Sérgio Leite de Andrade. “We are not only working on steel production and the mining process, but in the transformation process of steel (cutting, molding and solder ing). A ll this growth will guarantee t he supply for the needs of the oil and gas market”, he says.

Gerdau, on the other hand, is the market leader in the production of long steel in the Americas and one of the world’s main suppliers of special long steels in the world.

In Brazil, the company has the capacity to produce 2m tons per year from its facilities in Charqueadas, Pindamonhangaba and Mogi das Cruzes, as well as another 2m tons from its factories in the USA and

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commissioning

The engineering of

commissioning What, until a short time ago, was viewed as a set of activities executed in the final project phases of the construction and assembly of an industrial plant, their aim being to ascertain that its operational systems had been properly installed, fulfilling the client’s performance requirements, today constitutes a management process that permeates the entire implementation of a project, from its initial basic concept to its handover to the operator. This veritable engineering of commissioning has been consolidated in the country by the Brazilian company, Forship Engenharia, which, attentive to the demands and complexity of industrial plants in the petroleum and gas sector – whether it be a refinery, a platform, a drilling ship or a petrochemical unit – has innovated this process and created a culture of management excellence in the sector.

S

tar ting up an industrial unit is no simple task, even after the construction has been concluded.

Just as in the case of an aircraft flight, where it is necessary to carry out a check of all the plane’s instruments before being cleared for take-off, putting into operation an oil & gas production platform, a petroleum refinery or a petrochemical plant demands a series of actions to enter into commercial operation. The same occurs with a steel plant, a thermal power station or a mining installation, to give a few examples not restricted to the world of petroleum.

Few realize just how complex the process is that precedes the pressing of that little button that symbolizes the start-up of an industrial plant. Whereas, in the case of a plane, we obtain an insight into this process upon overhearing the pre-flight instrument check performed by the pilot and co-pilot, in a typical industrial

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unit this is practically impossible to witness. Even more so when we consider that, unlike an aircraft flight, industrial plants “take off” on much longer, non-stop “flights”: platforms, steel plants, refineries and other complex units are designed to operate for years on end. Stoppages are to be avoided, and even the ones scheduled for maintenance should not cause total paralyzation of production, since the plant normally possesses redundant equipment to that which is being adjusted, repaired or overhauled. The great challenge is to ensure that the unit will operate at the design capacity, without incidents or emergency breakdowns. In short, the aim is to guarantee the full operability of the unit.

The company’s DNA This quest for perfection spans across the whole array of project phases, with the commissioning process being considered today as strategic for the industrial sec-

tor, as it also implies reductions in cost, time and risk.

“Commissioning has, in effect, ceased to be merely the final part of the C in EPC (Engineering, Procurement and Construction). It is entangled with the whole project life cycle, from basic and detailed design elaboration, procurement of materials and equipment, contracting of services, and the construction itself to the handover of the unit to the client, ready to enter into immediate operation. Thereby our service is now considered a n i mpor t a nt support tool for the management of the entire EPC process”, affirms engineer Fabio Fares, President of Forship.

Creating the new culture that has aided to configure commissioning as management engineering was the natural path for a company that already had that in its DNA. “Forship was founded with

the prime objective of filling the gap in the process of commissioning industrial plants” recalls the executive. A gap that, according to him, was expressed, although not explicitly, by the maxim “a project is not ended, it is abandoned”. This cliché, even when not explicitly enunciated, was in the unconscious of the teams of engineers, technicians and operators responsible for handing over the unit to the plant operator “in a full state of operability”, stresses Fares.

This explains Forship’s heavy investments in the development of an engineering of commissioning.

“We went even further, creating our own methodology and management tools with the objective of enhancing quality and productiveness in the capacity of executing the inspections and tests, calibration, preservation, start-up, pre-operation and maintenance activities, among others within the scope of commissioning services”, he complements.

Forship consolidated expertise over a decade of commissioning major projects, such as production platforms, refineries and thermoelectric plants.

The crux of the question Operability is one of the key points in all this engineering, as, at risk of stating the obvious, there would be no sense in declaring a project concluded if it is not in fact ready to enter into operation.

Commissioning is aimed precisely at ensuring that, at the moment of “take-off”, the unit will indeed “take to the air” and not end up “aborting” or being “towed off to the hangar”.

“This process, as we have said, covers a series of activities applied to what are called commissionable objects, those that perform specific operational functions in the industrial plant”, points out Antonio Prates, Forship’s Director of Engineering. “Given that the basic objective of commissioning is to deliver the operational

systems, we realized the need and convenience of creating a specific definition for Operability in order to synthesize the condition in which a unit is ready for handover: in our v iew, t h is means that all the requirements of performance, reliability and

information traceability are met”, he explains.

“Operability is the synthesis of commissioning”, complements Fares. More than this, it has also been the secret of Forship’s success, culminating in becoming the recognized commissioning leader in the national scenario.

A proof of this is that, recently, a large operator invited eleven companies to par ticipate in a T&B Petroleum # 29

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Leadership in Offshore Class and Related Services e-mail: absrio@eagle.org • Phone: + 55 21 2276-3535 events 11º Energy Summit

The future

energy market

New investments and real actions on the part of the power companies are needed to face a 7.2% growth in domestic consumption this year, according to the forecast of the Energy Research Corporation (EPE). This was just one of the questions debated during the 11th Energy Summit, the traditional meeting of the Brazilian power industry, held in Rio de Janeiro.

Sponsored by the IBC, the event brought together representatives of the federal, state and municipal governments, as well as power companies, investors and representatives of industry associations and consumer groups to discuss the future of the energy market.

I

by Maria Fernanda Romero and Rodrigo Miguez

nvestments in nuclear power, hydroelectric management, renewable energy, project finance for energy and sustainability were on the agenda of the Energy Summit, which added a seminar on technology management to this year’s programming, as well as the Energy Trends Expo. “Besides the usual debates, the event reinforced its place as a backdrop for new business with this exposition, which brought in the latest in equipment and technology solutions for the industry”, points out Tatiana Mu-

nhoz, project manager of the IBC, which promoted the event August 3 – 5.

As had been previously announced the week prior to the event by Mauricio Tolmasquim, president of the EPE, the results of the institute’s research shows that Brazilian energy consumption is set to grow by 7.2%. An indicator that could very well be revised to 7.5%, according to the director of economic and environmental studies of the EPE, Amilcar Guerreiro, during the opening lecture of the Energy Summit.

Guerreiro pointed out that this growth is especially significant when considering the lukewarm consumption in other parts of the world – except for China , of course, which will continue at its accelerated pace of growth, requiring more and more energy. The executive pointed out that, even considering the slowing birth rate, Brazil increases its population by 14m people per decade, requiring an almost equivalent supply per household: around 13.7m residential units.

“All this requires energy. We have to respect the environment while allowing for new hydroelectric generators, since Brazil gains the equivalent of the population of Chile every ten years”, he stated. This year has been considered atypical, due to the recession in 2009, according to Guerreiro, who affirmed that the country is preparing for an average annual power demand increase of around 5%.

The executive defended the thermoelectric plants.

“Even if they are expensive and hard on the environment, they cannot be disregarded from our energy matrix. The EPE counts on thermoelectric power and seeks agreement on new nuclear power plants.”

Guerreiro revealed that there is concern regarding the storage of energy, which had previously been done cheaply with the big lakes of the mills.

The director of Economic and Environmental Studies cited that 52% of Brazilian energy will come from renewable sources by 2019, compared to a world average of 15%. According to Guerreiro, spending for extra power energy generation by 2019 will be US$ 114bn – reaching almost US$ 570bn, considering oil.

Guerreiro reckons there will be no drastic change in regulation for the power industry in the event the opposition party comes to power after the presidential elections in October. According to the executive, contracts have been respected, especially in the electric power industry. “No one believes there will be any rupture”, noted Guerreiro, remembering that the current government indeed changed some regulations, but without altering agreements that had already been signed. “This is an important point and I hope that it will be upheld. It is important for stability”, he highlighted.

In defense of the current regulatory framework, the executive noted that the companies today bid for projects that have already been environmentally licensed and walk away from the auctions with contracts closed, which helps them to obtain financing. “These were important steps that made the expansion of the industry possible”, affirmed Guerreiro.

Power partnership

option to expand the domestic capacity, together with alternative sources, such as wind and biomass power”, he estimates.

The total value of the agreement is just over US$1.8m, with the participation of EPE estimated up to US$ 800,000. The term of the agreement is set at 24 months, with the option for an extension.

Besides the new study, Eletronuclear is awaiting a disbursement of between US$ 3bn to 4bn from the National Economic and Social Development Bank (BNDES) by the end of the year. The resources are destined for the construction of the nuclear power plant, Angra 3, estimated to cost US$ 5bn. The plant will have a generating capacity of 1.350 MW. The price of energy from Angra 3 was foreseen at US$ 84.73/MWh, according to the Ministry of Mines and Energy (MME).

“If we do not secure this financing, we will have to redo our accounts and get a new loan, because our resources are running out”, says Leonam Guimarães, assistant to the directory of Eletronuclear, who would not like to have to renew the bridge loan of US$ 143m that Eletrobrás had contracted at a much higher interest rate. The forecast is for Angra 3 to come online by 2015.

DURING THE EVENT, the EPE announced it would set up a partnership with Eletronuclear to develop preliminary studies for selecting locations to construct nuclear power plants. The study from this partnership, formalized on August 11th in Rio de Janeiro, will be in addition to an initial Electronuclear new project study, exclusively for the Northeast region.

Data will concentrate on locations that could receive the new nuclear power plants in the Southeast, South, and part of the Midwest. The states analyzed will be: Espírito Santo, Minas Gerais, Rio de Janeiro, São Paulo, Paraná, Santa Catarina, Rio Grande do Sul, Goiás and Mato Grosso do Sul. According to the EPE, other areas may be included in the study, via a contractual amendment.

According to the president of the EPE, Mauricio Tolmasquim, the partnership with Eletronuclear will be very important to related planning studies about nuclear energy in the country. “Since the Brazilian hydroelectric capacity – which is our current priority – will reach its limit in approximately 20 years, nuclear energy is a good

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Events EDITORIAL ADVISORY BOARD

32

Affonso Vianna Junior Alexandre Castanhola Gurgel André Gustavo Garcia Goulart Antonio Ricardo Pimentel de Oliveira Bruno Musso Colin Foster David Zylbersztajn Eduardo Mezzalira Eraldo Montenegro Flávio Franceschetti Francisco Sedeño Gary A. Logsdon Geor Thomas Erhart Gilberto Israel Ivan Leão Jean-Paul Terra Prates João Carlos S. Pacheco João Luiz de Deus Fernandes José Fantine Josué Rocha

33

11th Energy Summit:

The future energy market

52 Coffee Break

Luiz B. Rêgo Luiz Eduardo Braga Xavier Marcelo Costa Márcio Giannini Márcio Rocha Melo Marcius Ferrari Marco Aurélio Latgé Maria das Graças Silva Mário Jorge C. dos Santos Maurício B. Figueiredo Nathan Medeiros Roberto Alfradique V. de Macedo Roberto Fainstein Ronaldo J. Alves Ronaldo Schubert Sampaio Rubens Langer Samuel Barbosa

coffee break

SERGIO SERGIO RODRIGUES RODRIGUES

by Orlando Santos

Photos: Divulgation

a designer a designer from the tropics from the tropics The Delta Larousse encyclopedia defines him as the creator of modern furniture in Brazil, citing his famous creation, the soft chair, a hallmark of Brazilian furniture. Although it was the first piece of Brazilian furniture to receive an international prize, the designer and architect, Sergio Rodrigues, is known for his characteristic simplicity – often the mark of a great artist.

Sergio Rodrigues – a designer from the tropics Caixa Cultural Rio de Janeiro – Galeria 3 Av. Almirante Barroso, 25 – Centro (metro: Carioca) Tels.: 2544-4080 / 2544-1099 / 2544-7666 Visitation: from August, 10th to September 19th, 2010. Tuesday to saturday: 10:00 am to 22:00 pm. Sunday: 10:00 am to 21:00 pm.

AN EXHIBITION OF THE ARTIST will be on display at Caixa Cultural, in the Center of Rio de Janeiro, through September, curated by Marta Micheli and Verônica Rodrigues, the designer’s daughter, under the title Sergio Rodrigues – Um designer dos Trópicos. The show will bring to the public a little known side of the artist’s creative process, besides the famous pieces of furniture, such as the soft chair, created in 1957 and that had a version awarded in 1961 at the famous Concorso Internazionale Del Mobile in Cantú, Italy.

With almost 70 pieces displayed, the exhibit shows the interconnection between the artists work and the history of Brazil from the point of view of Sergio Rodrigues, showing the playful and the unorthodox, exposing

the origins behind the furniture – its context, its history.

Together with Lúcio Costa (urbanist), Oscar Niemeyer (architect) and Roberto Burle Marx (landscape artist), the furniture designer Sergio Rodrigues, as he like to be called, completed the interiors of the buildings of the Brazilian capital with his essentially Brazilian style.

Constantly in the spotlight until today, the work of Sergio Rodrigues can be found in important projects in Rio de Janeiro, from the old Manchete to the modern Hotel Fasano, not to mention other commercial, institutional and residential establishments THE SOFT ARMCHAIR – The history of the creation of the soft armchair was recently remembered by its designer in an interview in the Eu section of the newspaper, Valor. Everything began when photographer Otto Stupakoff asked him to create a sofa – later becoming an armchair –

The DIZ armchair

The KILIN armchair

which Otto could throw himself upon to rest. That was how the Sergio’s most famous creation came to be.

The armchair is made of a cushion ingeniously fastened by leather belts to a sold wood frame of jacaranda, in the 1960s, and today made with certified wood. It is currently sold for prices much higher than US$ 8,000. People line up to buy them – much to the contrary of when he began.

Otto had no money to buy the piece he had ordered, and only got the armchair because Sergio sold it to him at cost. At first, it was not easy to find buyers for what is today

A CARIOCA ARTIST Born in 1927 in Rio de Janeiro on Joaquim Nabuco St, between the neighborhoods of Copacabana and Ipanema, Sergio Rodrigues is carioca – a native of Rio. In 1947 he started university at the Faculdade Nacional de Arquitetura da Universidade do Brasil. After graduating in 1952, he participated on the team for the project of the Centro Cívico, in Curitiba, PR. He worked in São Paulo at Forma. One year later, he returned to Rio and founded Oca, a store, art gallery and Studio all in one, which became a meeting place of the intelligentsia carioca.

In 1956, he opened a factory in Rio de Janeiro called Taba. Besides furniture for various ministries in Brasília, he received orders from the government in order to show Brazilian furniture abroad. The most significant project was for the Brazilian Embassy in Rome in 1959.

In the 1960s, Sergio developed a pre-fabrication system in wood, having, at the invitation of the UNB,

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a highly sought piece of furniture that had only become successful after the Italian award.

The DIZ armchair, his wife’s favorite, was put on display at the 2009 Rio França Contemporary Design exhibition at the Centro Cultural dos Correios. It is one of the highlights of the Caixa Cultural exhibition. According to his wife, the armchair is hard… but comfortable.

The show even has a surprise for visitors: an unprecedented piece of furniture created by Sergio Rodrigues – yet another reason not to miss the show that will go on through September 19th.

mounted several units in Brasília, and more than 200 modules around the country.

In 1961, he registered the soft chair for competition in the IV Concurso Internazionale del Móbile in Cantú, Italy, and won among 438 competitors from 27 countries.

Shortly afterwards in 1974, the soft chair became part of the design collection of the Museum of Modern Art in New York City. In 1989, his work had been awarded the Lápiz de Plata Prize at the Bienal de Arquitetura of Buenos Aires. In 1993, he participated in the Convegno Brasile in Brescia, Italy.

In 2004, he received from Itamaraty (the Brazilian Foreign Office), the Rio Branco Medal in Brasília. In the same year, his work was the theme of the individual exposition at the R 20th Century Gallery in New York, which was repeated in 2009 due to popular demand. At the same time, he was also exhibited at Galeria Espasso, also in New York City.

The success of the soft chair was such that if upstaged recognition from some of this other creations, some of which were much more significant due to their design solutions.

T&B Petroleum # 29

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articles

and Tiago Guerra Machado Andrade

sections 3 4 32 36

editorial hot news events professional profile

39 52 54 55

products and services coffee break meeting opinion

# 29

SPECIAL BUSINESS PL AN 2010-2014: PETROBRAS TO INVEST US$ 212BN IN BRAZIL

48 Single-pour/single pass loading, by Ricardo Portella and Luiza

Year XI • Issue 29 • September 2010 • www.tbpetroleum.com.br

opinion

46 So far, so close, by André L. P. Teixeira, Bianca de S. Lanzarin

Year XI • Issue 29 • September 2010 Photo: Bia Cardoso T&B PETROLEUM

44 Pre-salt: concession, production sharing and power of contractorss, by Antonio B. A. Sarmento

The Brazilian TECHNOLOGY and BUSINESS Magazine of Oil, Gas, Petrochemical and Biofuels

42 Protecting new technology, by Saulo Murari Calazans

It’s time for the pre-salt and the small oil and gas producers, of Haroldo Lima, General Director of the ANP – National Agency of Petroleum, Natural Gas and Biofuels

Steel for the pre-salt Rio de Janeiro gets three new steel factories Forship – The engineering of commissioning 11º Energy Summit – The future energy market

SPECIAL: BUSINESS PLAN 2010-2014

Petrobras to invest

US$ 212bn in Brazil

Special interview

John Forman Milne Albuquerque, Vice-president of HRT Oil & Gas

Back to Eldorado Protecting new technology, by Saulo Murari Calazans Pre-salt: concession, production sharing and power of contractors, by Antonio B. A. Sarmento So far, so close, by André L. P. Teixeira, Bianca de S. Lanzarin and Tiago Guerra Machado Single-pour/single pass loading, by Ricardo Portella and Luiza Andrade

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2 T&B Petroleum # 29

editorial

Rua do Rosário, 99/7º andar Centro – CEP 20041-004 Rio de Janeiro – RJ – Brasil Tel/fax: 55 21 3221-7500 www.tnpetroleo.com.br tnpetroleo@tnpetroleo.com.br MANAGING EDITOR Benício Biz beniciobiz@tnpetroleo.com.br NEW BUSINESSES DIRECTOR Lia Medeiros (55 21 8241-1133) liamedeiros@tnpetroleo.com.br EDITORS Beatriz Cardoso (55 21 9617-2360) beatrizcardoso@tnpetroleo.com.br ART and CULTURE EDITOR Orlando Santos (55 21 9491-5468) REPORTER Cassiano Viana (55 21 9187-7801) cassiano@tnpetroleo.com.br Fernanda Romero (55 21 9161-8744) fernanda@tnpetroleo.com.br Rodrigo Miguez (55 21 9389-9059) rodrigo@tnpetroleo.com.br INTERNATIONAL AFFAIRS Dagmar Brasilio (55 21 9361-2876) dagmar.brasilio@tnpetroleo.com.br GRAPHIC DESIGN Benício Biz (55 21 3221-7500) beniciobiz@tnpetroleo.com.br PRODUCTION GRAPHIC and WEBMASTER Laércio Lourenço (55 21 3221-7506) webmaster-tn@tnpetroleo.com.br Marcos Salvador (55 21 3221-7510) marcossalvador@tnpetroleo.com.br TRANSLATION Rick Toledano (55 21 9880-9905) COMERCIAL José Arteiro (55 21 9163-4344) josearteiro@tnpetroleo.com.br Cristina Pavan (55 21 9408-4897) cristinapavan@tnpetroleo.com.br

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Place your bets!

The announcement that China is now the world’s second largest economy came as no surprise to anyone, since both China and India have continued to grow despite the international economic crisis. Together with Brazil, these so-called BRIC economies have had an astounding rebound against the odds, except for Russia (the R in the acronym), which has been recovering slowly.

The growth of Brazil was even more surprising in the 1st semester of the year, reaching 8.9%, according to the Brazilian Institute of Geography and Statistics (IBGE).

It was the highest growth on record since the start of the country’s unprecedented performance beginning in 1996.

It is true that the Gross Domestic Product (GDP) in this second semester already indicates a slowdown in the economy, which can be expected after the major expansion after the first three months of the year.

The steel industry has also given signs that that both supply and demand are overheated, and, although industrial production has fallen, the supply chain of goods and services for the oil and gas industry has maintained the level of productivity.

All segments are on full-throttle due to the accelerated expansion of the oil and gas industry, pushed on by the investments of Petrobras, which has allocated more than US$ 212bn for its activities – especially for exploration and production, and a strong demand in the shipbuilding industry, and on to refining.

It is exactly this market that will host the world’s second largest event of its kind in the oil and gas industry: Rio Oil & Gas 2010, which has hit an all time record for number of participants, in terms of exhibitors and participants, as well as number of people registered in its technical sessions.

During the five days of the event, all eyes from the petroleum industry will be on the Riocentro, in Rio de Janeiro, in order to see for themselves the latest in technology and market trends – not to mention all the opportunities created by the exploration and production of Brazil’s Pre-Salt.

Companies, investors and specialists from many scientific areas will also witness what are the solutions at hand and what needs to be developed so that the oil and gas industry can operate sustainably in this new oil frontier.

Hence our initiative at Benício Biz Editores to bring not only our special editions of TN Petróleo and T&B Petroleum magazines to Rio Oil and Gas 2010, but an updated version of our first Student Guide, geared to the oil industry, as well as two technical maps: the Mexilhão Platform and the Offshore Activities in the Santos, Campos and Espírito Santo Basins.

The internationalization of this event, with around 300 participating companies, delegations and economic missions spread out among 12 international pavilions only attests to the spotlight Brazil has in the world petroleum industry.

If that were not enough, the fact that Petrobras is placing a megaoffer, an issuance of more than 4.3bn of shares and even ADRs abroad, with the object of capturing some US$ 74.5bn – surpassing the biggest issuance in history: Nippon Telegraph and Telephone (NTT), which raked in US$ 36.8bn – will also attract the attention of international investors, who see Brazil as a true ‘basin’ of opportunities – or a ‘reservoir’ of potentially big business.

Place your bets!

Benício Biz Executive Director

T&B Petroleum # 29

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hot news

STX Brazil Shipyard launches

Skandi Amazonas Commissioned by the owner Dof Navigation, Skandi Amazonas is the largest and most powerful vessel towing, supply and anchor handling ever built in Brazil. The vessel, built in the shipyard STX Brazil, will provide services to Petrobras to support operations in the maritime oil platforms in the Campos Basin. The

release of the vessel at sea is held in August.

By project type STX NOD-428, developed by STX Norway Design, the boat was built with the support and encouragement from the federal government and state of Rio de Janeiro, financing of the Merchant Marine Fund (FMM) and the Ministry of

Transport, through the Banco Nacional de Desenvolvimento Economico e Social (BNDES).

Propulsion is diesel-mechanicalelectric with a total of 22.360 kW and four generators of 2000 Kw each. The speed is 17.5 knots, with draft of 5.4 meters. The maximum draft is 7.8 meters.

In addition to Skandi Amazonas, STX Brazil has a portfolio of the Skandi Iguaçu, also of Dof, with the sea launch scheduled for the first quarter of 2011. Two other support boats commissioned by Deep Sea Supply and Siem Consub, they should be launch, respectively, by the end of the second and third quarter of 2011.

Developing services for the construction of offshore support vessels to drilling rigs, drilling and production, oilfield, the Brazilian shipyard STX Offshore Brazil, is located in Ilha da Conceição, Niterói, in a strategic point in the Guanabara Bay, with an area of 80,000 square meters, has about 1,500 employees and 300 contractors.

The STX Brazil Offshore specializes in the construction of offshore support vessels of high complexity and technological sophistication, making the most of their contracts in their industry.

Petrobras Capitalization The price of the oil barrel used to capitalize Petrobras will cost an average of US$ 8.51, as announced by the Treasury Minister, Guido Mantega, on September 1st – the same day the market was informed of the values and conditions for the capitalization of the company. The value of the rights transfer of 5bn barrels will be US$ 42.5bn, or R$ 74.81bn.

The capitalization process will have a minimum nationalization index of 37% during the exploratory period. During the implementation phase, the percentage will increase to 55% and an average of 65%.

The return on capitalization is estimated at 8.83% per annum.

“This is certainly the biggest operation of its kind in the history of the country”, stated Mantega. The capitalization process will be reserved to current shareholders, before any issuance to the market.

Petrobras capitalization – which took a year to get off the drawing board – is

4 T&B Petroleum # 29

Photo: Petrobras Agency

Capitalization agreement on average oil barrel price of US$ 8.51

scheduled to take place on September 30th. The government may cede as much as 5bn barrels of oil in areas that are still unknown. According to Mantega, the 5bn barrels will be extracted from six fields and one reserve in the event they are not

enough to fulfill the contract. The fields are: Tupi sul, Florim, Tupi nordeste, Peroba (defined as a reserve), Guará, Franco and Iara. The largest field is Franco with 3.1bn barrels.

The price of US$ 8.51 per barrel refers to the average price of the oil fields.

The Franco field, which should supply some 3.1bn barrels, will have a higher price: US$ 9.04.

The lowest price will come from the Iara field: US$ 5.82.

The president of Petrobras, José Sergio Gabrielli, stated that the choice of the Franco area for capitalization reflects the higher degree of exploratory knowledge available at the moment. “There is no risk as far as [oil] volume is concerned”, remarked the president.

André Teixeira & Associados law firm, located at Rio de Janeiro and member of Oil & Gas Law Alliance, participated of 8th Brazil Energy & Power, held on last August 23 in Houston, USA, under the organization of the Brazil-Texas Chamber of Commerce (BRATECC) and the American Chamber of Commerce of Rio de Janeiro (Rio AmCham).

The event was attended by numerous industry players, with participation of distinguished specialists.

The tax attorney Tiago Guerra Machado (picture), on behalf of André Teixeira & Associados, gave a lecture about taxation on Oil & Gas industry in Brazil, especially the effects of REPETRO and Covenant 130/2007 benefits and the new challenges to achieve them.

OTC Brasil 2011: call for papers For the first time ever, the Offshore Technology Conference (OTC), the world’s foremost event for the development of offshore resources in the fields of drilling, exploration, production and environmental protection, is expanding to Brasil to create the OTC Brasil 2011 Conference and Exhibition.

OTC Brasil is a new event sponsored by the Offshore Technology Conference, and is OTC’s first event held outside of Houston. OTC Brasil will be held biennially beginning in 4-6 October, 2011. This conference will provide a technical program and exhibition that addresses the latest in technical advances, challenges and opportunities for the deep and ultra deepwater offshore sector in Brazil and other international regions. OTC Brasil will offer a unique Brazilian flair, providing networking opportunities as well as offering Brazilian cultural events and contributions to social programs in Brazil.

“We are very excited about this new international conference and the opportunities in Brazil to share technical knowledge” said Susan Cunningham, chairman of the OTC Board of Directors. “This conference will offer a tremendous opportunity for global companies to learn about Brazilian technology and operations, and for professionals in Brazil to get the latest information about approaches being used in projects around the world”.

OTC Brasil will offer technical presentations during three days of concurrent sessions. The conference agenda includes special sessions presenting business-related topics, panel sessions with industry and technical leaders sharing their views on key trends and technical issues, and a range of social events. Updates will be provided on key international offshore projects, as well as projects in Brazil. The call for paper proposals for OTC Brasil will begin in November 2010. Information on the call for papers will be posted on the OTC Brasil website at www.otcbrasil.org.

OGX announced in September 2nd that its subsidiary, OGX Maranhão, has identified additional evidence of gas in the Devonian section of well 1-OGX-16MA, in block PN-T-68, in the onshore basin of Parnaiba.

OGX Maranhão, an entity formed by OGX S.A. (66.6%) and MPX Energia S.A. (33.3%) is the operator and holds a 70% stake in this block, while Petra Energia S.A. holds the remaining 30%.

Upon further drilling of well OGX-16, strong evidence of gas was identified in two additional objectives in the Devonian section, proving a significant hydrocarbon potential in this basin. These objectives are approximately 800 meters below the previous interval announced to the market on August 12, 2010. Fractured shales of the Pimenteiras Formation were identified with up to 909 Total Gas Units (TGU) and a column of approximately 23 meters. Right below this accumulation, sandstone reservoirs were identified in the Itaim Formation providing evidence of 370 TGU in a column of approximately 25 meters.

The drilling of well OGX-16, also known as the California prospect, is still in progress and OGX continues to target new objectives. This well is located approximately 260 km from São Luis, capital of Maranhão. The rig QG-1, provided by Queiroz Galvão, initiated its drilling activities on July 5, 2010.

Photo: Courtesy OGX

Photo: Divulgation

André Teixeira & Associados participated of 8th Brazil Energy & Power

OGX Announces New Gas Show in the Parnaíba Basin

T&B Petroleum # 29

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special interview John Forman Milne Albuquerque, Vice-president of HRT Oil & Gas

Eldorado Back to

That is black gold that HRT Oil & Gas will be prospecting in the Amazon region, which had been called ‘Eldorado’ during another political era.

“The Solimões Basin has very good potential”, affirms geologist from the state of Pará, John Forman Milne Albuquerque, the vice-president of Brazil’s newest oil company, acquired by HRT in the third quarter of the year, when talking about the 21 exploration blocks in the Solimões Basin, which adds up to 48.000 km².

“Why is there such good potential? Geology is a curious thing, because it works with correlations. If we look back at the geological evolution of the region, and remember that the continents had once been connected, we see that this basin has a correlation with the north of Africa. And what do we have there?

Oil and gas in great quantities”, explains the executive, hours before beginning the quiet period required by the Brazilian securities regulator, the Comissão de Valores Mobiliários (CVM), of any company before an initial public offering.

The ex-director of the National Oil, Natural Gas and Biofuels Agency (ANP) is betting on a successful IPO, despite taking place at the same time of a similar process at Petrobras. “We hold the second largest concession area in Brazil.

6 T&B Petroleum # 29

by Beatriz Cardoso

With just one-third of our area assessed, we already have more than 2bn barrels”, highlights Forman.

“Not to mention the potential of the two blocks in the deep waters off the coast of Namibia, which the company holds directly, and three more in which the company holds 40%”, adds the geologist specialized in mining geology with a MSc from Stanford University.

The first international concessions of HRT are located near the Kudu field, where 1.3 trillion cubic feet of natural gas has been discovered. The company has also picked up two blocks in Namibia by acquiring Lábrea Petróleo, which has a 10% participation in four onshore concessions. Confirming its bet on high-potential areas, despite the risks, HRT plans to intensify its operation this year: full gas ahead!

TB Petroleum – The quiet period is about to begin for HRT, as stipulated in the regulation of IPOs. What are your company’s expectations?

John Forman – When HRT O&G was founded last year, there was already talk of an IPO in order to position our investors. We are working to get the IPO ready for the September, when we will evaluate whether or not the market has any appetite for this IPO. What are the advantages to taking the HRT O&G public at this time in which Petrobras is doing the same?

We have important assets in the Solimões Basin, the largest producing onshore basin in the country (and the second biggest in natural gas), as well as offshore assets on the coast of Namibia [HRT has acquired a 40% stake in conces-

We hold the second largest concession area in Brazil. With just one-third of our area assessed, we already have more than 2 billion barrels.

T&B Petroleum # 29

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special interview

sions, the rest is divided among Universal Power, 40%; and Acarus Investments, 20% in the Orange Basin; and 100% of the other two blocks in the Walvis Basin]. We have worked very hard in this initial phase of creating the company and have identified resources and reserves in volumes much higher than those when we first started. All this means that we have a potential, as far as assets are concerned, that is much higher than we did six months ago. Actually, we are working with a potential that is at least five times greater than we had last year, considering Namibia, which is a recent acquisition. To our disadvantage, we might consider the mood (or rumors) of the market, but it appears that we are sharing the same mood as the market as far as a successful IPO is concerned. We have had indications that there are many investors interested in our company due to our potential. Therefore, we are reasonably confident that it will be a success.

Don’t you think that the capitalization of Petrobras and the regulatory reform will impact this process?

What about the elections?

Naturally this is a concern.

Petrobras will go to market with an impressive volume of resources, 8 T&B Petroleum # 29

We did work with geochemistry, which is the forté of our company, and which gives answers seismic data doesn’t. Seismics tell you the structure, but do not tell you whether there is oil or not; geochemistry tells you if there is oil.

around US$ 25bn. Of course ours is much more modest. Although we will be going to market with a much less resources, we do not necessarily think this will be a negative factor. As far as the elections are concerned, today things are much more stable. On the international scene, the situation in Europe, where some countries are having serious problems, is much more worrying. However, the indicators from the US are pointing to reasonable recuperation. I believe that when there are bad economic scenarios in regions of great importance, areas of initial investment – like ours – become much more attractive.

Does that mean that the emerging markets at this time are the best bet?

Yes, because we’ve got the resources and we need to reallocate them to investments with greater probabilities for higher returns, where there is a forecast for growth and not where in places where under recession and low economic forecast. The changes in the regula-

tory framework do not affect us: our assets are outside the objective of this new regime. We currently have 51% of the 21 blocks in the Solimões Basin and we are up-to-date on all our obligations with the ANP. How is the exploratory campaign going?

What is HRT’s biggest asset? It is our technical capability! We have put together a group of the best technicians both in and out of Brazil. Our technical ability to reanalyze the already-existent data in the best way, reprocess seismic data, and reinterpret drilling data has led us to believe that we are looking at resources and reserves greater than had been expected – and that is not only our opinion. Our forecast have been certified by DeGolyer & MacNaughton, which has estimated our potential reserves at 2.1bn (1bn in Solimões) – and this certification is only regarding one-third of our concession blocks. That is why I say that we could reach fives times more than this volume with Namibia.

It was due to our technical professional capabilities that we greatly improved the quality of our data and information, and got the positive certification we expected.

Did you do more seismic acquisition?

No, we just reprocessed it: we applied modern techniques to process old data, and got much better results with higher definition. We did work with geochemistry, which is the forté of our company, and which gives answers seismic data doesn’t. Seismics tell you the structure, but do not tell you whether there is oil or not; geochemistry tells you if there is oil. So, putting together both techniques, we were able to put together a much more efficient analysis, as far as identifying prospects are concerned.

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T&B Petroleum # 29

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special interview

We are in the midst of one of the gravest offshore environmental accidents in history – BP in the Gulf of Mexico. Onshore operations are not any different and it is wellknown that preserving the Amazon is one of the main objectives of environmentalists around the world.

Are you not afraid of placing all your eggs in a basket that is considered taboo?

No. I disagree. Fortunately, Petrobras has a long history of Amazon operations without any incidents: the company had more than 20 years of success at the Urucu field and with no environmental problems – and that is exactly what we will do.

Was it not quite a battle to implement the pipelines to make the transfer of natural gas from the region possible?

That is another question, but it is not environmental. As far as I know, the environmental issue was used as a way to stall the construction of the pipelines – not due to environmental concerns, but rather due to the immediate interests of certain groups in the region. Therefore, I do not think we will face great difficulties. Problems and restrictions will always exist, but I must reiterate 10 T&B Petroleum # 29

Fortunately, Petrobras has a long history of Amazon operations without any incidents: the company had more than 20 years of success at the Urucu field and with no environmental problems – and that is exactly what we will do.

that success story of Petrobras in the region only goes to show that it is possible to explore oil and gas and respect the environment.

When will drilling operations start?

Does it depend on the result of the IPO? No. We have already raised enough resources to work until the middle of next year. So, it doesn’t affect us. The IPO is much more a business decision at heart of the company.

So what is it that can be done by the middle of next year?

All the surface work, geochemistry; we are contracting seismic exploration. We are going to go back a little to start again. We did the reprocessing of all the existing data and identified some new data – we have got significant body of data on some blocks that needs reprocessing. For others, we have contracted seismic analysis. That said, once hydrocarbons have been identified, we need seismic analysis

to detail the structures. We have already identified some areas. It is important to point out that this region has been intensely explored

by Petrobras for 30 years: Urucu has been producing oil for 20 years, with current oil and gas production at around 100,000 to 120,000 barrels per day. Before the pipeline, the natural gas was reinjected into the reservoir. Today, it is supplying the Manuas region to develop the natural gas market. We must remember that Petrobras’ challenge last century was to reduce the dependence of imported petroleum to bring the nation to self-sufficiency as quickly as possible. Upon discovering its first major oil field, the Campos Basin, the company concentrated its efforts offshore in this region.

The program was a success: we reached self-sufficiency thanks to the Campos Basin, although other basins have made important contributions. But it was Campos that made the difference.

From the beginning HRT has pointed out the potential of other basins, including onshore, where Petrobras did not continue efforts due to its focus on the Campos Basin...

Exactly. These onshore basins were put aside in this exploratory process. When the Petroleum Law was changed, Petrobras was given the option to choose areas it wished to continue to explore: the company correctly chose the offshore areas, despite the great potential of other areas, such as Solimões. That is because for 30 years, drilling and finding gas in the middle of the Amazon was not good business.

You simply gave up. Today we have a new outlook for the various areas where there are already wells drilled: areas with light oil; oil with associated gas and condensate, and with spectacular wealth; others with non-associated natural gas.

In other words, there is much more below the Amazon Forest…

We see the Solimões Basin as being high-potential. Why is there such good potential? Geology is a curious thing, because it works with correlations. If we look back at the geological evolution of the region, and remember that the continents had once been connected, we see that this basin has a correlation with the north of Africa. And what do we have there? Oil and gas in great quantities! It is a region of great production and considerable reserves of around 200bn barrels. In geo-speak, we would say that Solimões and North Africa are Paleozoic basins of similar geological evolution.

Is that the same way they speak of the pre-sal in Angola?

Exactly. That is the geological understanding that took us to Namibia. I must reiterate that HRT is a company with expertise in the oil and gas potential of the South Atlantic. Angola has been a tremendous success, and now Nigeria. It is just that the petroleum industry is conservative: big oil prefers places where large volumes of oil and gas have already been identified. As a modest company among global oil companies, we went where there was less competition: Namibia.

Why? Because we believe in our interpretation of the data from the pre-salt in these countries. We are aware not only of our potential, but also of our financial capacity.

You mentioned there were areas with wells already. It is possible to recovery them?

Yes. However, we will be doing that later, since we have acquired exploration blocks, we have an obligation with the ANP to drill new wells. Once we have complied with our obligations in the first phase

As a modest company among global oil companies, we went where there was less competition: Namibia. Why? Because we believe in our interpretation of the data from the pre-salt in these countries.

of the project, we can go back and reactivate old wells.

What is the forecast for drilling in Solimões?

We must drill at least one well per block. Of the 21 blocks we operate, the exploration period is valid until January 13, 2011. The other eight blocks are in the second phase, which begins next March.

Therefore, we have to drill at least eight wells in the next two years.

Next year, we will analyze what to do with the remaining 13 – whether to return them or assume our compromise of drilling the wells.

What about Namibia?

Petroleum concessions all over the world are quite similar. There is a minimum exploratory period, divided in three phases: the initial phase is geological and geophysical, and interpretation of existing data; the second phase is new data collection; and it is in the third phase that there is an obligation to drill. We are just in the first phase in Namibia, interpreting the available data collected in the past, which allows us to identify the potential of those fields.

Are you planning on participating in the future biddings in Brazil?

One of the reasons we are doing the IPO is exactly to raise the resources necessary to participate in new bid rounds.

What is the forecast for HRT O&G’s first oil?

We believe in 2014 we will be ready to have more significant oil and gas production. But nothing is stopping us from reaching it next year, if you consider that we have recently acquired Lábrea Petróleo, which has two blocks in Namibia, and a 10% stake in four onshore blocks in Brazil together with Cowam, in the basins of Espírito Santo, Recôncavo and Rio do Peixe, where new discoveries have already been communicated in two wells, and the third is being drilled.

In the Espírito Santo Basin, we have already identified the presence of hydrocarbons, and there is the potential for small production within a year or year and a half.

But I prefer to say in 2014 we plan on having more significant production in terms of flow and cash.

What about your retirement?

It has been postponed once again. Firstly, when I was doing consulting and was invited to join the ANP. Secondly, when I returned to consulting and realized I wanted to have more fun, so starting an oil company seemed like a good idea to create new things. I spent my life creating things, including Nuclebrás, which was something new at the time. In petrochemicals, I worked during the time of privatization and the subsequent expansion of industrial facilities that were being acquired in the process of privatizations. Creativity keeps you working with more motivation – at least for me. There are those who love routine. I am not one of them. I prefer more and more challenges... I am still a boy, although 72 years old!

T&B Petroleum # 29

11

business plan 2010-2014

Petrobras to invest

US$ 212bn

by Maria Fernanda Romero

Photos: Petrobras Agency

in Brazil

12 T&B Petroleum # 29

With US$ 118.8bn in resources for the E&P area and US$ 73.6bn for downstream, Petrobras reinforces its strategy to increase oil and gas and derivatives production with higher aggregate value in its Business Plan 2010 – 2014.

Of the total budget of US$ 224bn, projects in Brazil alone will take up US$ 212.3bn, with a potential level of contracting of US$ 28.4bn within the country. that, in all, 686 large-scale projects are part of the current planning for 2010 - 2014. In the previous plan, the forecast had been for 531 largescale projects – each one with more than US$ 25m.

Revised production In Business Plan 2010-2014, the target production for both Brazil and abroad by 2014 is 3.9m barrels of oil equivalent per day, representing an annual growth of 9.4% the these four years, on a basis of projected for 2010 of 2.7m barrels.

Of the total forecast for 2014, there will be 2.9m barrels of oil from Brazil, of which 152,000 are

Technological challenges As part of the new plan, Petrobras has allocated resources to meet technological challenges, operational safety and human resources. In the Health, Environment and Safety Area (HES), US$ 3.3bn will be invested; US$ 2.9bn

Petrobras Business Plan 2010-2014

Pre-salt investment In 2010-2014 (US$ 33 bn)

Investiment: US$ 224 bn Distribuition (1%)

US$ 2,5 Petrochemicals (5%)

US$ 5,1

Biofuels (2%)

US$ 3,5

Infraestructure (2%)

US$ 0,9

Corporate (1%)

US$ 2,8

Exploration (13%)

US$ 4,3

G&E (8%)

US$ 17,8

E&P (53%)

US$ 118,8* Downstream (30%)

US$ 73,6

Development (78%)

Art: T&B Petroleum

As had been expected, the Exploration & Production Area (E&P) will receive more than half of the investment foreseen in the Petrobras Business Plan 2010 - 2014: with US$ 118.8bn, representing 53% of the total US$ 224bn in resources, allocated to projects in Brazil and abroad.

The amount is 14% higher than the investments estimated in the previous business plan (20092014). The second highest budget goes to the Supply Area (with encompasses refinery, transport and commercialization), which will receive US$ 73.6bn, or 33% of the total budget.

Investments in new projects amount to US$ 31.6bn (a little more than 14% of the total), with E&P receiving 62% (US$ 19.7bn); Gas and Energy with 21% (US$ 6.5bn) and Supply with 16% (US$ 5.1bn).

In Business Plan 2010-2014, there was a reduction of US$ 17bn in scratching and redefining other projects and adding 155 new endeavors. The president of Petrobras, José Sérgio Gabrielli, confirmed

from the pre-salt reserves. Another 623,000 barrels will be natural gas extracted domestically, and the remaining 304,000 barrels from oil and gas from abroad.

By 2020, Petrobras expects to reach an average daily production of oil equivalent of 5.4m barrels, representing and annual increase of 7.1% on the expected 2010 basis.

Domestic production will contribute 4m barrels of oil (1.2m from pré-salt) and 1.1m barrels of natural gas to this amount. Foreign oil and gas production should reach 323,000 barrels by the end of the decade.

According to Mr. Gabrielli, the reduction of 318,000 boe in the total projected production by 2020 when compared to the previous plan is due to a revision in the company’s international goals in light of the revision of future investments for the current E&P strategy of Petrobras. “The targets presented only take into consideration the current projects in our portfolio and reflect neither the potential production from the Paid Assignment nor other projects of the new regulatory framework”, he added.

US$ 27,8

*US$ 33 bn (Pre-salt) US$ 75,2 bn (Post-salt)

T&B Petroleum # 29

13

business plan 2010-2014

Photo: Petrobras Agency

in the Information and Communications Technology Area (TIC); and US$ 5.2bn in Research and Development (R&D) – totaling an investment of US$ 11.4bn.

Petrobras has also announced that of the US$ 224bn in investments foreseen in Business Plan 2010-2014, US$ 58bn in resources will be captured from the market. According to the president, this value is expected to be obtained in the process of capitalizing the company by the sale of shares to the public.

Mr. Gabrielli stated that the need to capture resources increased 152% when compared to the previous plan, when Petrobras had previously foreseen a figure US$ 23bn.

He further pointed out that the net leverage up to 35% should be maintained. “Selling shares on the market should maintain the capital structure and balanced indicators; however, Petrobras will still seek financing from various sources both in Brazil and abroad”, he stated in an official release from Petrobras.

According to the company, the figures were calculated on the exchange rate premise of R$ 1.78, compared to the R$ 2.00 that had been used as the calculation base for the previous plan. The price of the barrel has been projected for 2010 at US$ 76, increasing to US$ 78 in 2011 and US$ 82 in the following years. EBTIDA has been estimated at US$ 155bn for the period, against the US$ 149bn that had been estimated in the previous plan.

President Jose Sergio Gabrielli of Petrobras and directors during the presentation of the PN 2010- 2014.

area will be to guarantee the discovery and acquisition of reserves, optimize the oil and gas recuperability in producing concessions, as well as develop the pre-salt of the Santos Basin and intensify the exploration efforts in the other presalt areas and the new frontiers of Brazil and abroad.

“We have got a lot to do, especially with the increased oil exploration in the pre-salt area, not to mention our focus in the biofuels areas, such as ethanol”, said Mr. Gabrielli.

The increased production will be sustained by the development of the post-salt areas, via the implementation of large-scale projects in the active areas of the company. Additionally, it takes into consideration the investments in the areas already conceded in the pre-salt, which will start to have a greater presence in the company’s production curve in the post-2014 period.

In this context, an average of almost three production systems are planned to be in operation each year, besides the other scheduled average

Exploration and refinery According to Mr. Gabrielli, the resources projected for the E&P

Corporate Goals - Indicators Production of Oil and NG – Brazil

1

Production of Oil and NG – Total2 Throughput - Brazil (thousand bpd) 1– thousand boe/day 2– thousand bbl/day (Brazil + International)

14 T&B Petroleum # 29

of conducting three long-duration tests per year in the pre-salt areas.

Supply Mr. Gabrielli affirmed Petrobras’ strategy to expand refining capacity with the amount of US$ 73.6bn in investments by 2014 scheduled for the Supply Area. The president pointed out that, with these investments, Petrobras will have the refining capacity of 2.26m barrels per day by 2014, representing an increase of 23.4% when compared to the current capacity of 1.83m barrels per day. Over the period, the demand for fuel is projected to increase 21.9%, surpassing the current 1.93m barrels to reach 2.35m barrels.

“We are increasing our refinery capacity to keep up with the pace of domestic demand”, he stated.

The use of Petrobras’ installed refinery capacity has passed 92% in the first quarter of this year, due to the significant increase in the nation’s fuel consumption.

Besides increasing the capacity of existing facilities, three more

Accomplished 2009

Goal 2010

Forecast 2014

Forecast 2020

1,971

2,100

2,980

3,950

2,525 -

2,723 1,831

3,907 2,300

5,382 3,200

T&B Petroleum # 29

15

business plan 2010-2014

Principal projects scheduled during 2010-2014 Updated business plan added new projects Mexilhão NG

Th. bpd

NG 35,000bpd Uruguá/Tambaú Cidade de Santos

2800

FPSO Cidade de Angra dos Reis Tupi Pilot 100,000 bpd

2400

Cachalote and Baleia Franca FPSO Capixaba 100,000 bpd

Marlim Sul SS P-56 Module 3 100,000 bpd

TLD Tupi NE EWT 30,000 bpd EWT Guará Dynamic Producer 30,000 bpd

Roncador SS P-55 Module 3 180,000 bpd Jubarte FPSO P-57 180,000 bpd

Tiro Pilot SS-11 30,000 bpd Aruanã EWT Cidade Rio das Ostras 15,000 bpd

Tupi NE Pilot FPSO 120,000 bpd 2,980 th. bpd

Papa-Terra TLWP P-61 FPSO P-63 150,000 bpd

Roncador FPSO P-62 Module 4 100,000 bpd

Tiro/Sidon FPSO 100,000 bpd

Parque das Baleias FPSO P-58 180,000 bpd

Aruanã FPSO 100,000 bpd

Guaiamá FPSO 100,000 bpd

4 EWT Pre-salt

4 EWT Pre-salt

2011

2012

3 EWT Pre-salt

2 EWT Pre-salt

2013

2014

1200 2010

facilities are scheduled in the Business Plan to come online: the Abreu e Lima Refinery in Pernambuco and the Premium I Refinery and the first phase of the Petrochemical Complex of Rio de Janeiro (Comperj), which had had its original project altered in order to include a refinery with the capacity to process 165,000 barrels of oil per day, mainly for diesel production.

After 2014, the second phase of the Comperj project is scheduled, with a production capacity of 165,000 barrels per day for basic petrochemical products, and the Premium II Refinery. All in all, Petrobras expects to process 3.2m barrels of oil by 2020, in order to meet the expected demand of 2.8m barrels.

Gas and Energy The chemical gas segment will be the focus of investments in the Gas and Energy Area until 2014.

This is the big news in Business Plan 16 T&B Petroleum # 29

Photo: Petrobras Agency

Art: T&B Petroleum

1600

Guará Pilot FPSO 120,000 bpd

Oil Pre-salt Natural Gas EWT (Extended Well Test)

2,100 th. bpd 2000

Antecipation of Baleia Azul FPSO Espadarte 100,000 bpd

2010-2014. This area will receive 8% or US$ 17.8bn, of which US$ 2.7bn will be allocated for liquefied natural gas (GNL), US$ 5.7bn for chemical gas and US$ 4.1bn for electric energy generation.

Mr. Gabrielli stated that the investments in the Area will be to consolidate Petrobras as the leader in the Brazilian natural gas market.

During the press conference, the

executive stated that Petrobras intends to make investments for the chemical transformation of natural gas, including the construction of three fertilizer facilities for the production of nitrogenates (ammonia and urea) in alignment with other Petrobras assets in the segment. “The infrastructure investment cycle in our portfolio tends to diminish until 2014, and tends to increase investments in chemical gas”, stated Mr. Gabrielli.

According to the president of Petrobras, the change in the company’s investment profile is due to the fact that the demand for natural gas in Brazil is strongly dependent upon hydroelectric generation, which is directly related to the amount of water in the reservoirs.

“This change represents an adaptation in our investment portfolio for the flexible tendencies of the Brazilian market and to allow for a higher aggregate value to natural

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17

business plan 2010-2014

by 2014, as well as activities in derivatives distribution abroad.

Petrobras investment in petrochemicals should reach US$ 5.1bn (5%) in the next five years, according to the Business Plan.

These investments will be focused on increasing petrochemical production and biopolymers, preferably by partnerships, especially in Brazil, in alignment with the other Petrobras segments.

gas”, he said. With the investments in the chemical-gas segment, Mr. Gabrielli pointed out that Brazil will become self-sufficient in ammonia within the projected period, but will still need to import urea to meet the domestic demand.

Distribution and petrochemicals The company’s distribution area will receive US$ 2.5bn in order to guarantee the leadership of Petrobras Distribuidora (BR), with the goal of 40% of the domestic market

Biofuels

Art: T&B Petroleum

The biofuels segment (which includes production, logistics, and commercialNew refineries, fuel quality, and modernization ization) will receive inaccount for 70% of capex US$ 73,6 bi – Business Plan 2010–2014 vestments of US$ 3.5bn Logistics – an increase of US$ 1bn for oil (3%) International (1%) Fleet US$ 2,21 US$ 0,73 when compared to the expansion (6%) US$ 4,42 previous plan.

Operational The strategy in the ethImprovement (11%) US$ 8,1 anol segment has been reAdditional directed for acquisitions in capacity (50%) US$ 36,8 order to become an imporQuality and conversion (29%) tant player in this market, US$ 21,3 ensuring the technological capacity to produce sustainable biofuels, states the company.

Miguel Rossetto, president o f Pe t r o b r a s Biofuels, stated that the company, together with partners, has the current capacity to process 24m tons of sugarcane, with the forecast of producing 890m liters of ethanol from the 2010/11 harvest. This is a volume that should more than double by 2014, reaching 2.6bn liters – positioning the company as responsible for 5% of the domestic production.

Mr. Rossetto pointed out the announcement – on the very morning of the press conference – of the strategic partnership with Grupo São Martinho S/A to increase ethanol production in the state of Goiás, in the Brazilian Midwest. The agreement foresees the creation of a new company, named Nova Fronteira Bioenergia S/A, which will control the Boa Vista Mill.

With an investment of US$ 270 million , Petrobras Biofuels will retain 49% of the shares in the new

Brazilian demand and refining capacity Strong Brazilian GDP growth projected to increase demand 3.4% p.y.

Thousands bpd

Clara Camarão 2010

Refinaria do Nordeste 230,000 bpd (2013)

Replan Revamp U200+PAM 33,000 bpd 2010

Comperj st (1 phase) 165,000 bpd (2013)

Premium I st (1 phase) 300,000 bpd (2014)

Premium I nd (2 phase) 300,000 bpd (2016)

3,000

3,196 2,794

2,356

2,260

Premium II 300,000 bpd (2017)

1,155 2,000

1,933

1,831

Comperj nd (2 phase) 165,000 bpd (2018)

1,016

826

1,187

1,000

937 769

452

403

338 0

2009 Gasoline

2014

2010 Diesel

Others

2020

Throughput

Obs.: Comperj’s first phase is now a new refinery. In 2014 the forecast is to export 966 thousands bpd.

18 T&B Petroleum # 29

petrobras to invest US$ 212bn in brazil

company. The resources will be allocated to expand the production of the new company, especially at the Boa Vista mill, located in Quirinópolis, GO. The new company will increase sugarcane crushing capacity from the current 2.5m tons to 7m tons by the 2014/15 harvest.

According to Mr. Rossetto, the partnership represents yet another strategic alliance for the consolidation of the company as a significant ethanol producer. “The partnership with São Martinho is another alliance to develop production in the state of Goiás, with an important synergy with other assets of the Petrobras System.”

International projects The state reduced investments in the International Area, since Petrobras is currently emphasizing increased domestic oil production and the discovery of new reserves.

Despite the investment focus in the domestic market, the president of Petrobras announced that the International Area will receive resources of US$ 11.5bn, to focus on the development of E&P in the Gulf of Mexico (Cascade, Chinook, Saint Malo and Tiber), The West Coast of Africa (Nigeria), and Peru.

Investments in this area of the company were reduced from US$ 16bn to US$ 11bn.

Production chain According to the manager of new investments and infrastructure of the Rio de Janeiro State Industrial Federation (Firjan), Cristiano Prado, Petrobras’ enormous investments represent a unique opportunity for development in

Business Plan 2010-2014 – engineering challenges • Simplification and standardization – reduction in the complexity of the projects, using standard solutions • Competitiveness/sustainability – using international engineering patterns and metrics in our facility projects • Brazilian content – contributing for the consolidation of Brazil as a supplying hub with international competitive leve

Brazil, and it should not be wasted.

“Therefore, we need to step up the efforts, especially as far as industrial policy is concerned, in order to guarantee that the production chain that attends the industry can participate competitively in this process – thereby maximizing the jobs and the income generated in this entire process, and broadening its impact as much as possible”, states Mr. Prado.

“The more than 600 projects foreseen in the Petrobras Business Plan 2010 - 2014, with investments of US$ 212.3bn in Brazil, will have a significant impact in the development of infrastructure, economic growth, technological and manufacturing capabilities of the Brazilian industry”, states Paulo Godoy, president of ABDIB “It is important to point out the challenge an investment plan like this represents. We must act now to secure the necessary funding” (meaning,

the financial consolidation of shortterm debt over a period sufficient enough to mature as an investment and its amortization).

The president of the National Union for Offshore Construction and Naval Repairs (Sinaval), Ariovaldo Rocha, is optimistic about the announcement of the investment figures in t h e Pe t r o b r a s Business Plan.

“The construction of vessels and platforms is a long production cycle and to anticipate demand”, he points out. “The [shipbuilding] industry was anxiously awaiting the new Petrobras Business Plan and was pleased to see that the projects for the construction of tankers, marine support vessels, drilling rigs and oil platforms proceed as planned”, added Mr. Rocha.

According to the executive director of the oil, gas, bioenergy and petrochemical division of the Brazilian Association of Machine and Equipment Industry (Abimaq), Alberto Machado Neto, The new Petrobras Business Plan represents an unprecedented level of investments for an oil company: US$ 212bn in single country over five years.

The executive of Abimaq highlighted that one of the most important points of the program is the requirement of a minimum local content.

“A fact that the capital goods industry looks upon favorably.

However, so that T&B Petroleum # 29

19

the new numbers presented portray the real situation of the participation of domestic industry, there are some things to be considered”, points out Mr. Machado.

According to him, the figures announced by Petrobras regarding contracting in the domestic market (around 75%) are not effectively distributed along the entire supply chain. “The figures from the industry are at a level much less than 30%”, he notes. “It is not that the 75% is wrong, but one thing is Petrobras’ investment in Brazil – which may be in the acquisition of imported products made domestically, services, civil construction, material, etc. – an another thing is whether the local equipment factories are both producing and supplying here.”

Alberto Machado points out that, if it were not duly explained, the percentage released, namely 20 T&B Petroleum # 29

Photo: Cortesia Wilson,Sons

Photo: Petrobras Agency

business plan 2010-2014

75%, may give the impression that everything is solved and there is nothing more to be accomplished, since the industry is at 75% local content, when the new plan requirement is much less. “The reality is much different: we are even running the serious risk of deindustrialization within the country, mainly due to factors that are even out of the decision-making power of

the industry and Petrobras, such as: the appreciation of our currency (the Brazilian real), taxes and interest rates that are much higher than those practiced in other countries, which end up hurting the competitiveness of our domestic products.”

The executive considers yet another challenge in the outsourcing of purveying, meaning when Petrobras contracts a package deal with a company and this company is responsible to purvey the parts of the package.

“In the purchasing Petrobras does directly, the local content reaches the highest percentages of local content than outsourced purveying. There needs to be a mechanism that permits Petrobras to demand outsourced contractors meet the same percentages that the company does when buying directly.”

The director of Abimaq further points out that in order for Petrobras to reach its objectives as stated in its Business Plan, the company, the industry and – even more so, the government – need to adopt urgent measures that facilitate the real inclusion of the local capital goods industry in these forecasted investments.

“Brazil cannot lose this opportunity to leverage its development. Oil can promote even greater development by creating a state-of-the-art manufacturing industry than by simply positioning the country as a net exporter of oil or even fuels and raw materials of low aggregate value”, he concluded.

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21

steel industry

Steel

for the pre-salt

by Cassiano Viana

The US$ 224bn Petrobras Business Plan – US$ 30.9bn budgeted for the pre-salt and US$ 77.3bn for the post-salt – has tremendous impacts along all areas of the nation’s production chain. But it is in the steel industry where some of the most visible effects can be seen as a result of such an investment outlook.

22 T&B Petroleum # 29

Photo: Cortesy Usiminas

Petrobras’ current projects alone – not including the pre-salt development projects – will demand 4m tons of steel by 2015. All this steel will not only take the form of ship hulls, platforms, drill rigs, but also in tubes and other equipment.

In tubes alone, Petrobras’ current assets will demand 911,940

tons of carbon steel, stainless steel and connectors. Platforms will take up 832,000 tons, while ship hulls will require another 656,850 tons.

The pre-salt will have consumed something around 1.9m tons of steel between 2009 and 2017; however, this figure could, and should, increase.

Yet another 680,000 tons of steel will be needed to meet the demands of constructing the 49 vessels of the National Petroleum Fleet Modernization and Expansion Program (Promef).

With all this expected demand, the domestic steel companies are investing in new technologies and re-evaluating processes and even their current production infrastructure – everything in order to meet the demands of their clients in the Brazilian oil and gas market.

The demand from pre-salt exploration, for example, will guarantee the scale to develop new stainless steel products in Brazil.

“The pre-salt will bring with it other scales of production. It is an opportunity to consolidate the inoxidable steel market for the Brazilian oil and gas market”, states Paulo Roberto Magalhães Bastos, the directorpresident of ArcelorMittal Inox Brasi l, dur ing the 65th International Congress of the Brazilian Association of Metallurgy, Materials and Mining (ABM), held in Rio de Janeiro at the end of July.

“They are well known technologies used in other markets, but now they can be brought to Brazil, where previously there had been no scale for production”, he explains. According to Bastos, the inoxidable steels that are more resistant to corrosion are already

being used in refineries, since they are used to process oils with a higher corrosive degree than in the past. “The pre-salt should also increase the demand for duplex steels”, he says.

The nation’s biggest producer of plain-carbon steel at 7m tons, Usiminas hopes to increase production capacity by 3m tons in the next two years, reaching 10m annual tons.

“We have an investment forecast of US$ 7bn. From this total, 4m will be allocated for the oil and gas segment, making it possible – among other projects – a new line of hot lamination that should be up and operating in the middle of 2011, as well as a new process of fast cooling to come this August, in partnership with Nippon Steel, which will allow us to produce steel of the highest technology and most widely utilized in the presalt, increasing the production of thick slab steel by 2012”, explains the company’s vice-president of businesses, Sérgio Leite de Andrade. “We are not only working on steel production and the mining process, but in the transformation process of steel (cutting, molding and solder ing). A ll this growth will guarantee t he supply for the needs of the oil and gas market”, he says.

Gerdau, on the other hand, is the market leader in the production of long steel in the Americas and one of the world’s main suppliers of special long steels in the world.

In Brazil, the company has the capacity to produce 2m tons per year from its facilities in Charqueadas, Pindamonhangaba and Mogi das Cruzes, as well as another 2m tons from its factories in the USA and T&B Petroleum # 29

23

steel industry

Challenges the size of the North Sea and the Gulf of Mexico The pre-salt, however, will bring with it challenges to the steel industry that go beyond production capacity: there will be technological hurdles to be overcome.

“Taking into consideration the greater quantity of carbon gas in the pre-salt reserves, Petrobras’ main concern is corrosion” says the manager of Materials Technology of the Petrobras Research Center (Cenpes), Carlos Cunha Dias Henriques “The steel used in the pre-salt will have to be highly resistant to corrosion and have a good mechanical resistance”, he warns.

At any rate, the steel industry has undergone a transformation,

Market data Steel industrial park: 27 mills, 12 integrated (after iron ore) and 15 semi-integrated (pig iron and scrap metal), with 8 industrial corporate groups.

Installed capacity: 42.m tons/year of crude steel Crude steel production: 26.5m tons

24 T&B Petroleum # 29

after some adjustment periods – especially when considering raw materials.

“In order to keep up, we have to follow the evolution of the oil industry, especially Petrobras – our biggest client – that has a way about finding oil at even greater and greater depths” jokes Roberto Jourdan de Aquino, director of Operations for the Flexibles Division of Technip Brasil. “Most of the time, it is about being strategic and keeping a foot ahead of the technological demands of the Petrobras”, he says, adding that optimizing production scales are another key point for the steel industry.

“The challenges of the presalt are as important, historic and transforming as those experienced in the North Sea and the Gulf of Mexico”, points out Juan Carlos González Sánchez, di rector of Product Research and Development for Tenaris/Confab.

“In order to guarantee technology – a crucial point – we have and participate in research and development programs in conjunction with universities and research centers both in and out of Brazil”, he says.

According to Marcelo Almeida Cunha Ferreira, superintendent of Research and Development of Vallourec & Mannesmann/V&M Steel products: 25.7 tons Apparent consumption: 18.6m tons Number of employees: 116,409 Balance of trade: US$ 1.9bn – 7.5% of the nation’s balance of trade, and 15th world steel exporter (direct exports) 5th largest net exporter of steel (export - import): 6.5m tons Exports: to more than 100 countries.

do Brasil, besides reliability, the products need to be delivered on time and be high performance.

“We put together a project in 2008 specifically for the pre-salt, budgeted at round 1m euros annually.

The catch is to supply products and services as they are demanded”, he says. “We are currently expanding our product line, and preparing to supply even more solutions”, states the executive.

The group has investments of US$ 500m, which includes a new state-of-the-art press that has been operating for just over one year and produces forged pieces and duplex steel.

“We need to give a rapid response to the market. The petroleum industry is global. The pre-salt is a turning point for equipment manufacturers to form a global market. That is where we are headed”, states Celso Antonio Barbosa, manager of Technology for P&D da Villares Metals.

According to Paulo Augusto Filho, vice-president of Technology of FMC Technologies, the main technological challenge of the presalt will be the great number of wells to be drilled. “The solutions to reduce corrosion will be the key to developing products, using forged steel with nickel-plated connectors on a large scale”.

Photo: T&B Petroleum Image Bank

Spain. “This [capacity] allows us to absorb, with some ease, the c h a l le nge s of the pre-salt in Brazil”, affirms the executive director of special steels of Gerdau, Joaquim Bauer.

Gerdau Açominas supplied more than 22,000 tons of profiles for the construction of the dry dock in the state of Rio Grande do Sul. The nation’s first large-scale dock, it will be used for the construction and maintenance of the oil and gas exploration and production platforms of Petrobras.

steel for the pre-salt

Rio de Janeiro gets three new steel factories Ternium should officially announce the facility in the Complexo do Açu within a month, which is under construction by the Grupo EBX of Brazilian entrepreneur Eike Batista, in the recently approved industrial district of São João da Barra, on the north coast of the state.

The project, with investments of some US$ 5bn, will join the steel plants of the Chinese state company, Wuhan Iron and Steel (Wisco) and Grupo EBX, which will also set up in the Porto do Açu. Officially announced in April of this year, the Wisco mill will receive investments of some US$ 5bn (70% from Wisco) and is scheduled to start operations with a production capacity of 5m tons/year in three years’ time.

“With the new projects, Rio de Janeiro will have the nation’s biggest production capacity. In fact, I suspect that the state has already taken this position after CSA was up

Photo: Cortesy ThyssenKrupp

Rio de Janeiro will gain three new steel factories in the next few years. The new facilities will increase the state’s steel production capacity. Together with two other projects underway, some US$ 16bn will be invested in the industry.

The announcement was made by the Rio de Janeiro state secretary of Economic Development, Energy, Industry and Services, Julio Bueno, at the opening of t he sem i na r “Perspectives for the development of the steel industry in the state of Rio de Janeiro”, held at the end of July in the auditorium of the Rio de Janeiro State Industrial Federation (Firjan).

The biggest project is the steel plant of Ternium, the holding company of long steels of the multinational company, Technip at the Complexo do SuperPorto do Açu. The facility will have a production capacity of some 5.6m tons of steel slabs per year. Two more projects – whose investors have requested confidentiality – are negotiating in the cities of Barra Mansa and Quatis, in the Middle Paraíba region.

Together, these two projects will add more than 1.5m tons/year of steel to the state’s current production capacity.

According to Julio Bueno, another project, already tendered, will be raised by the Companhia Siderúrgica Nacional (CSN) in the port of Itaguaí, in the metropolitan region, expected to produce 3m tons/year of steel. The five new steel plants should double the state’s capacity, from 14.17m tons/year to 29.27m tons/year: thereby Rio de Janeiro will become the first in the ranking of Brazilian steel production, which currently belongs to the state of Minas Gerais.

and operating”, states the secretary, who was referring to Companhia Siderúrgica do Atlântico (picture), opened in Santa Cruz, in the west zone of the Rio de Janeiro metropolitan area, last June. The facility has a production capacity of 5m tons/year after an investment of US$ 13.2bn from Vale and ThyssenKrupp.

Bueno pointed out that the state also got an integrated steel plant for the Votorantim Group, in Rezende, RJ in 2009. The facility was the result of an investment of US$ 550m and has a production capacity of 1.2m tons of laminated steel and 1m tons of long steel.

The seminar, organized by the Secretary of Economic Development, in conjunction with the Universidade Federal do Rio de Janeiro (UFRJ), brought together executives from steel companies, representatives of financial and research entities, as well as industry specialists. On the agenda of the meeting were topics covering market, logistics, environmental conditioning, locations, tax and finance, as well as the incentive from the Research, Development and Innovation (PD&I).

Mineral Plan production of 1bn tons by 2030 Government forecasts

As a basis from which to draft public policy for the Brazilian mining industry for the next 20 years, the Geology, Mining and Mineral Transformation Plan 2030 (Plano GMT 2030) from the Ministry of Mines and Energy (MME) was presented to the director of Technology and Transformation of the MME, Fernando Freitas Lins, at the 65th International ABM Congress.

In the final phase of drafting, the GMT Plan 2030 forecasts Brazilian iron ore mining will reach 1bn annual tons in 20 years. The volume is 150% higher to the almost 400m tons produced last year. Steel production is expected to grow 288.67%, surpassing the 26.5m tons of last year to 103m tons in 2030.

According to Lins, the last government plan for the industry was made in 1994.

Since then, the world has changed: with a mining boom in 2003, largely caused the unprecedented growth of super-populated countries, such as China and India, among other developing nations.

T&B Petroleum # 29

25

commissioning

The engineering of

commissioning What, until a short time ago, was viewed as a set of activities executed in the final project phases of the construction and assembly of an industrial plant, their aim being to ascertain that its operational systems had been properly installed, fulfilling the client’s performance requirements, today constitutes a management process that permeates the entire implementation of a project, from its initial basic concept to its handover to the operator. This veritable engineering of commissioning has been consolidated in the country by the Brazilian company, Forship Engenharia, which, attentive to the demands and complexity of industrial plants in the petroleum and gas sector – whether it be a refinery, a platform, a drilling ship or a petrochemical unit – has innovated this process and created a culture of management excellence in the sector.

S

tar ting up an industrial unit is no simple task, even after the construction has been concluded.

Just as in the case of an aircraft flight, where it is necessary to carry out a check of all the plane’s instruments before being cleared for take-off, putting into operation an oil & gas production platform, a petroleum refinery or a petrochemical plant demands a series of actions to enter into commercial operation. The same occurs with a steel plant, a thermal power station or a mining installation, to give a few examples not restricted to the world of petroleum.

Few realize just how complex the process is that precedes the pressing of that little button that symbolizes the start-up of an industrial plant. Whereas, in the case of a plane, we obtain an insight into this process upon overhearing the pre-flight instrument check performed by the pilot and co-pilot, in a typical industrial

26 T&B Petroleum # 29

unit this is practically impossible to witness. Even more so when we consider that, unlike an aircraft flight, industrial plants “take off” on much longer, non-stop “flights”: platforms, steel plants, refineries and other complex units are designed to operate for years on end. Stoppages are to be avoided, and even the ones scheduled for maintenance should not cause total paralyzation of production, since the plant normally possesses redundant equipment to that which is being adjusted, repaired or overhauled. The great challenge is to ensure that the unit will operate at the design capacity, without incidents or emergency breakdowns. In short, the aim is to guarantee the full operability of the unit.

The company’s DNA This quest for perfection spans across the whole array of project phases, with the commissioning process being considered today as strategic for the industrial sec-

tor, as it also implies reductions in cost, time and risk.

“Commissioning has, in effect, ceased to be merely the final part of the C in EPC (Engineering, Procurement and Construction). It is entangled with the whole project life cycle, from basic and detailed design elaboration, procurement of materials and equipment, contracting of services, and the construction itself to the handover of the unit to the client, ready to enter into immediate operation. Thereby our service is now considered a n i mpor t a nt support tool for the management of the entire EPC process”, affirms engineer Fabio Fares, President of Forship.

Creating the new culture that has aided to configure commissioning as management engineering was the natural path for a company that already had that in its DNA. “Forship was founded with

the prime objective of filling the gap in the process of commissioning industrial plants” recalls the executive. A gap that, according to him, was expressed, although not explicitly, by the maxim “a project is not ended, it is abandoned”. This cliché, even when not explicitly enunciated, was in the unconscious of the teams of engineers, technicians and operators responsible for handing over the unit to the plant operator “in a full state of operability”, stresses Fares.

This explains Forship’s heavy investments in the development of an engineering of commissioning.

“We went even further, creating our own methodology and management tools with the objective of enhancing quality and productiveness in the capacity of executing the inspections and tests, calibration, preservation, start-up, pre-operation and maintenance activities, among others within the scope of commissioning services”, he complements.

Forship consolidated expertise over a decade of commissioning major projects, such as production platforms, refineries and thermoelectric plants.

The crux of the question Operability is one of the key points in all this engineering, as, at risk of stating the obvious, there would be no sense in declaring a project concluded if it is not in fact ready to enter into operation.

Commissioning is aimed precisely at ensuring that, at the moment of “take-off”, the unit will indeed “take to the air” and not end up “aborting” or being “towed off to the hangar”.

“This process, as we have said, covers a series of activities applied to what are called commissionable objects, those that perform specific operational functions in the industrial plant”, points out Antonio Prates, Forship’s Director of Engineering. “Given that the basic objective of commissioning is to deliver the operational

systems, we realized the need and convenience of creating a specific definition for Operability in order to synthesize the condition in which a unit is ready for handover: in our v iew, t h is means that all the requirements of performance, reliability and

information traceability are met”, he explains.

“Operability is the synthesis of commissioning”, complements Fares. More than this, it has also been the secret of Forship’s success, culminating in becoming the recognized commissioning leader in the national scenario.

A proof of this is that, recently, a large operator invited eleven companies to par ticipate in a T&B Petroleum # 29

27

commissioning

specific tender for commissioning in a particular project. Besides Forship, only three presented a proposal, but with bids so incompatible with the scope of the work (two presented an extremely low budget, completely unviable to perform the service, and the third, an astronomical one) that they were disqualified. “We won the fight without even entering the ring,” jokes the head of Forship, who presented the best proposal in terms of both cost and service. It was evident too that the competitors

had not even understood well what was the scope of the bid.

Innovation is a must T he leadership conquered

by Forship in the commissioning area has been consolidated through constant concern for the quality of its services. In other words, it has made its continuous commissioning development a veritable engineering work.

“We have had the courage and capacity to innovate the concepts of commissioning, to develop and

practice it as an engineering discipline, thereby replacing the old, mistaken idea of regarding it as simply a set of post-construction activities”, states Fares.

Based on the correct understanding of what commissioning is and the permanent need for improvement, Forship has invested continuously in the development of the commissioning discipline and in its capacity to execute this complex service with efficacy and competitiveness. “We invest not only in the training of technical

Planned diversification The success achieved in the development and consolidation of commissioning engineering has led Forship to broaden its horizons – with gains for its clients.

F

our years ago, the company headed towards diversification of its services, the main criterion being the level of correlation with this discipline.

“The commitment to operability was kept as the focus of the company, guiding the investments in engineering.

This policy guided the inclusion of new services to its portfolio, such as operation & maintenance, consulting (development and implementation of commissioning methodology, owner’s engineering, certification of operability, regulatory support), HMSWeb (licensing, administration and support) and construction & assembly of small industrial plants”, explains Antonio Prates, the Forship Director of Engineering.

Today, the company, which started working for the oil & gas followed by the energy sectors, also operates in other segments of the market, such as mining and petrochemicals. In 2006,

28 T&B Petroleum # 29

it took a decisive step towards internationalization of its operations, with the creation of Forship Asia (FSA), a subsidiary located in Singapore, which, in a little over three years, had already accumulated over a dozen contracts involving commission-

ing and consulting services.

“The majority of these contracts are related to the construction of drilling platforms, a fact which also makes us the Brazilian commissioning company with the greatest experience and capability to deal with this type of industrial plant”, said Fabio Fares in a celebratory tone. Moreover, he remembered that it had participated in the implementation of the first FPSO to operate in the Mexican Gulf, for the Cascade and Chinook fields, operated by Petrobras America. With this project, Forship believes it is going also to make its mark on this important new scenario.

the engineering of commissioning

and managerial human resources, through an intensive comprehensive program, but also in the development of methodology, management tools and techniques”, reiterates the executive.

Based on the threefold concept of Engineer ing-ManagementExecution, the company has succeeded in accelerating the process of creating know-how, creating the first commissioning management software developed by a Brazilian private enterprise, as well as the first in the world fully Internetbased, namely HMSWeb. “Since 2002, the know-how consolidated in this process and the capacity to manage the great volume of information generated by the large scale services we provide, has allowed us to innovate the way commissioning is contracted”, informed the Director of Engineering, Antonio Prates. “ Forship was the first national company capable of quoting a lump sum price for the whole range of commissioning services, an alternative to the traditional forms of unit price for labor or for specific test and inspection services, thus meeting our clients’ requirements”, he complements.

Forship has not only developed a new discipline, but also under-

takes to continuously update the concepts, methods and tools applicable to this highly specialized engineering service. “We seek to add value to the commissioning process, also making it fulfill a role as a quality tool and support for the management and integration of the project as a whole, given its intense and sensitive interface with other processes such as planning, project engineering, procurement, construction & assembly, and operation & maintenance”, explains Fabio Fares.

Our goal is to maximize the client results, be it the operator or the EPC contactor. “We understand that this is what justifies our existence and ensures the survival and longevity of Forship as a company”, stresses the Director. “Thus, we have helped our clients to structure an effective and correctly dimensioned commissioning solution that

is also a powerful instrument for project management support.”

Partnership with EPC When contracted at the right moment, Forship acts since the bidding phase, analyzing the project information and contractual requirements to establish a competitive organizational solution for the commissioning process.

“We define and detail the scope of work, estimate the number of man-hours necessary for the management and execution of the activities, devise the histograms of personnel, materials and services, and meticulously evaluate the overall cost of the process”, elaborates Antonio Prates. For him, with this approach Forship has made a significant contribution to the market, “even when we are not contracted directly to execute the work”, he adds.

commissioning

In EPC tur n-key projects, Forship’s major contribution as a subcontracted party has been its expertise in commissioning management and engineering, encompassing the Operability requirements for the plant under construction. “As the constructive aspects constitute the main challenges and the greatest costs of the works, Constructability typically assumes for the EPC the role of project protagonist, attracting all attention and priority”, points out Fabio Fares.

He expla ins t hat, w it hout commissioning occupying the role of co-star, indispensable to the handover of the finished unit, the projects will have less chance of meeting the schedule, quality and costs goals, and the opportunity to mitigate the inherent risks would be lost. “Our function is to strive for the focus on operability throughout the whole life cycle of the project – an essential condition to guarantee the handover of the plant to the operator fulfilling the contract requirements”.

The executive emphasized that in non turn-key projects, where the company is directly contracted by the operator, there is greater weight attached to the integration aspect within the content of the services provided, since, in the absence of an EPC contractor, the operator takes the responsibility for the project implementation. As recent examples of projects in this format, Fares mentions the implementation of Petrobras’ Luis Carlos Prestes combined cycle thermal power station, in Três Lagoas, and the construction of the drilling platforms Danny Adkins and Jim Day, owned

by Noble, in Singapore.

Specific qualification In a little over 10 years, Forship has accumulated almost a hun30 T&B Petroleum # 29

dred contracts, involving over 70 industrial plants and more than 50 clients, approximately half being operators and half EPCs, in Brazil and overseas. “We are proud of our bold trajectory and our distinct approach, which has made us leader of the market. We were the first commissioning company to obtain ISO 9000 certification for Commissioning Engineering and Management, and we have incorporated in our practices and tools the standards of PMI® (Project Management Institute, the main world non-profitmaking association in project management, currently with over 500,000 members in 185 countries)”, stresses Fares.

The executive believes that Forship has made an important contribution to the evolution of commissioning solutions employed, especially – but not solely – in the oil & gas sector. However, in his assessment, some major operators and EPCs still do not possess specific records for this discipline, which turn good intentions in frustration and repetition of errors from the past, with commissioning not adequately fulfilling its purpose.

“Most EPC contractors are aware of the importance of a structured commissioning solution, not least because they have already experienced losses, lack of control and even chaos in previous projects, principally due to trivial events that that have been avoided with much lower costs than the amount of incurred loss”, stresses the President of Forship. Even so, according to him, a recurrent solution among the EPCs has been the use of professionals from the engineering design team to develop the commissioning documentation, the commissioning management being absorbed by the project management team itself, strengthened by the allocation of some specific commissioning co-

ordinators. “The commissioning field activities in this context are executed, in part, by the assembly teams, complemented by labor contracted by unit rates or by hiring of specific services. This has perhaps been the solution most commonly employed, normally inducing recurrent faults, given that project engineering is not synonymous with commissioning engineering”, states Fabio Fares.

In addition to that, Fares argues that exactly in the period of greater demands for the commissioning team, the engineering design is often practically concluded and the respective team is in the process of reallocating to a new project.

“The EPC project management, which already has to face the big challenges of the engineering-procurement-construction activities, rarely succeeds in absorbing in an organized manner the highly specialized needs of the commissioning process management” The executive points out that, ironically, the reasons alleged

by EPCs insisting on this type of organization are of economic origin: that is, it is believed that, taking advantage of the resources already mobilized for the project, complemented by a low-cost commissioning subcontract, will fulfill the contract more economically, within the budget. “The issue is that, in adopting this strategy, the commissioning loses efficacy and productivity, and, consequently, its capacity to avoid financial losses in the project, which may be significantly greater than the intended saving”, warns Fabio Fares. “Besides this, EPC project managers also lose the notion of the real commissioning costs, preventing them not only from budgeting correctly, but also from consolidating the know-how for a best execution in future projects.”

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T&B Petroleum # 29

31

events 11th Energy Summit

The future

energy market

New investments and real actions on the part of the power companies are needed to face a 7.2% growth in domestic consumption this year, according to the forecast of the Energy Research Corporation (EPE). This was just one of the questions debated during the 11th Energy Summit, the traditional meeting of the Brazilian power industry, held in Rio de Janeiro.

Sponsored by the IBC, the event brought together representatives of the federal, state and municipal governments, as well as power companies, investors and representatives of industry associations and consumer groups to discuss the future of the energy market.

I

by Maria Fernanda Romero and Rodrigo Miguez

nvestments in nuclear power, hydroelectric management, renewable energy, project finance for energy and sustainability were on the agenda of the Energy Summit, which added a seminar on technology management to this year’s programming, as well as the Energy Trends Expo. “Besides the usual debates, the event reinforced its place as a backdrop for new business with this exposition, which brought in the latest in equipment and technology solutions for the industry”, points out Tatiana Mu32 T&B Petroleum # 29

nhoz, project manager of the IBC, which promoted the event August 3 – 5.

As had been previously announced the week prior to the event by Mauricio Tolmasquim, president of the EPE, the results of the institute’s research shows that Brazilian energy consumption is set to grow by 7.2%. An indicator that could very well be revised to 7.5%, according to the director of economic and environmental studies of the EPE, Amilcar Guerreiro, during the opening lecture of the Energy Summit.

Guerreiro pointed out that this growth is especially significant when considering the lukewarm consumption in other parts of the world – except for China , of course, which will continue at its accelerated pace of growth, requiring more and more energy. The executive pointed out that, even considering the slowing birth rate, Brazil increases its population by 14m people per decade, requiring an almost equivalent supply per household: around 13.7m residential units.

“All this requires energy. We have to respect the environment while allowing for new hydroelectric generators, since Brazil gains the equivalent of the population of Chile every ten years”, he stated. This year has been considered atypical, due to the recession in 2009, according to Guerreiro, who affirmed that the country is preparing for an average annual power demand increase of around 5%.

The executive defended the thermoelectric plants.

“Even if they are expensive and hard on the environment, they cannot be disregarded from our energy matrix. The EPE counts on thermoelectric power and seeks agreement on new nuclear power plants.”

Guerreiro revealed that there is concern regarding the storage of energy, which had previously been done cheaply with the big lakes of the mills.

The director of Economic and Environmental Studies cited that 52% of Brazilian energy will come from renewable sources by 2019, compared to a world average of 15%. According to Guerreiro, spending for extra power energy generation by 2019 will be US$ 114bn – reaching almost US$ 570bn, considering oil.

Guerreiro reckons there will be no drastic change in regulation for the power industry in the event the opposition party comes to power after the presidential elections in October. According to the executive, contracts have been respected, especially in the electric power industry. “No one believes there will be any rupture”, noted Guerreiro, remembering that the current government indeed changed some regulations, but without altering agreements that had already been signed. “This is an important point and I hope that it will be upheld. It is important for stability”, he highlighted.

In defense of the current regulatory framework, the executive noted that the companies today bid for projects that have already been environmentally licensed and walk away from the auctions with contracts closed, which helps them to obtain financing. “These were important steps that made the expansion of the industry possible”, affirmed Guerreiro.

Power partnership

option to expand the domestic capacity, together with alternative sources, such as wind and biomass power”, he estimates.

The total value of the agreement is just over US$1.8m, with the participation of EPE estimated up to US$ 800,000. The term of the agreement is set at 24 months, with the option for an extension.

Besides the new study, Eletronuclear is awaiting a disbursement of between US$ 3bn to 4bn from the National Economic and Social Development Bank (BNDES) by the end of the year. The resources are destined for the construction of the nuclear power plant, Angra 3, estimated to cost US$ 5bn. The plant will have a generating capacity of 1.350 MW. The price of energy from Angra 3 was foreseen at US$ 84.73/MWh, according to the Ministry of Mines and Energy (MME).

“If we do not secure this financing, we will have to redo our accounts and get a new loan, because our resources are running out”, says Leonam Guimarães, assistant to the directory of Eletronuclear, who would not like to have to renew the bridge loan of US$ 143m that Eletrobrás had contracted at a much higher interest rate. The forecast is for Angra 3 to come online by 2015.

During the event, the EPE announced it would set up a partnership with Eletronuclear to develop preliminary studies for selecting locations to construct nuclear power plants. The study from this partnership, formalized on August 11th in Rio de Janeiro, will be in addition to an initial Electronuclear new project study, exclusively for the Northeast region.

Data will concentrate on locations that could receive the new nuclear power plants in the Southeast, South, and part of the Midwest. The states analyzed will be: Espírito Santo, Minas Gerais, Rio de Janeiro, São Paulo, Paraná, Santa Catarina, Rio Grande do Sul, Goiás and Mato Grosso do Sul. According to the EPE, other areas may be included in the study, via a contractual amendment.

According to the president of the EPE, Mauricio Tolmasquim, the partnership with Eletronuclear will be very important to related planning studies about nuclear energy in the country. “Since the Brazilian hydroelectric capacity – which is our current priority – will reach its limit in approximately 20 years, nuclear energy is a good

T&B Petroleum # 29

33

events

Furthermore, the executive noted that the EPE should conclude the studies of where to locate a nuclear power plant in the South and Southeast of the country by the end of the year. According to an agreement with Eletronuclear, the research will subsidize the long-term planning, as well as define the location of future nuclear power plants. After the Central Nuclear in the Northeast, the government plans on construction new mills in the Southeast.

Less tax Carlos Faria, president of the National Association of Energy Consumers (Anace), completely disagreed with Brazil being ‘a world leader in energy taxation’, which, together with the financial charges, represents 47% of the final cost. “It is absurd. With this surcharge of almost 50% on energy, it comes as no surprise that Brazilian industries try to set up factories in other countries to flee from this burden”, declared Faria, pointing out that ICMS in Rio de Janeiro (a state VAT, which is most often levied) is among the nation’s highest.

According to the director of Anace, society should mobilize to reduce taxation, as well as extinguish the Conta de Consumo de Combustíveis (CCC), a tax on electric power concessionaires to subsidize diesel oil for thermoelectric generation in isolated areas (especially in the North of the country), which are not reached by the power grid.

Faria refuted the director of the EPE, stating that thermoelectric mills running on fuel oil are very expensive and should be avoided. “Today, with the integrated system, the CCC can be extinguished, which would alleviate five percentage points on the value paid by individual and industrial consumers”, he pointed out.

The resources from the CCC are managed by Eletrobrás, and it is the responsibility of the National Electric Energy Agency (Aneel), to set the annual value of the CCC, which are levied monthly on the light bills from power distributors. With regard to wind power, the executive praised the first energy auction, and announced a second round, but noted that the power should be directly available to the market and not maintained as only a reserve.

“Anace is completely in favor of the use of nuclear energy and believes that, besides Angra III, the construction of new nuclear power plants should have been approved with a publicly disclosed deadline.”

Regarding the reduction of reservoirs, Faria com34 T&B Petroleum # 29

mented that, although it is a risk factor, the main worry of Anace continues to be the tax burden. “It tends to increase the Brazil Cost and inhibits the competitiveness of the domestic industry. Besides the unreal exchange rate, which keeps the country down when compared to the rest of the world”, he concluded.

Technology for energy The ‘Technological Management of Energy’ seminar, which was held in parallel to the debates of the Energy Summit, brought together cases from domestic and foreign companies showing the advantages of incorporating technology to improve the profitability and reliability of the power generation and distribution system.

Critical Software, a player in the power generation, distribution and transmission segments, besides its energy efficiency projects and monitoring and power generation data systems, made a presentation on power plant management and energy assets. One of the highlights was the importance of the smart grid to control information on energy production, especially for wind farms and in small hydroelectric plants.

In the case of wind energy, the main challenges lie in the cost of maintenance of wind turbines, which suffer from fatigue and atmospheric conditions. According to industry data, an average of five interventions per year is necessary for the maintenance of the blades.

Therefore, the monitoring of turbines is a necessary preventative measure to get data on the equipment, reducing the cost of maintenance. Another factor that damages the blades is the atmospheric conditions: on the wind farms of the state of Rio Grande do Sul, there is often ice formation. By managing external conditions, it is possible to take preventative measures to reduce costs.

ABB showed the advantages of the technological modernization of hydroelectric mills to improve reliability. Fábio Nugnezi, general manager of power and water generation of ABB, pointed out that today there are still hydropower plants in operation since 1910, and that they need a technology overhaul, which includes automation.

One of the solutions ABB presented at the Energy Summit was the retrofit: maintaining all the structure while only changing the old equipment. Nugnezi also stated the importance of an automation to integrate the system within a power plant, increasing efficiency since data and knowledge collected about the system is greater.

Other cases highlighted included solar cooling, presented by Marcos Teixeira, project manager of the

the future energy market

energy program of the German technical cooperative, GTZ, and the gas desulfurization using the Semi-Dry technology for thermoelectric plants run on coal, presented together with Paulo Bade of MPX and Marcelo Ozawa, technology manager of Enfil.

The need to diversify The Companhia Operadora do Mercado Energético (Coomex), the nation’s largest independent power company (by business volume), which started its first generation project in May this year, is enthusiastic about the current energy market.

The company, which commercializes energy, manages assets and special energy services, sees great opportunities in the future of two segments: generation and consumption. Founded in November 2005, the company has been organizing auction after auction of megawatts (MW) generated from sugar and ethanol processing.

The president of Coomex, José Manoel Amorim, believes there is much room for new power generation projects, citing the example of the Santo Expedito Hydroelectric Plant in Santa Maria do Oeste, state of Paraná. With just 1MW of installed capacity, it is the start of the company’s initiative to diversify its operations. The endeavor belongs to the holding company of Fênix Geração Hidráulica (FGH), of which Coomex has a 51% stake.

According to Amorim, the market is ready for new projects, due to growing demand, accessible prices that give a return on investment, and a power regulatory framework that is getting more favorable to long-term contracts. “We see the perspective of assets of independent production, of energy distribution, as a great investment opportunity, which means that the opportunity to diversify investments and the very energy matrix, wit traditional entrepreneurs of the industry broadening the supply of megawatts per hour”, he says.

The Coomex executive pointed out the evolution in the power generation industry has been accelerating for three years, with the first auction from alternative energy sources, and that the market should maintain the pace of growth for the next few years.

“This intense growth will continue, especially for the power distribution industry that is medium and small scale”, he added.

Highlighting the company’s policy of continually promoting the development of its staff, Amorim, who is

also a member of the Brazilian Association of Electric Energy Commercializers (Abraceel), spoke about the institution’s initiative to qualify energy operators in order to improve activities.

According to Amorim, the object of the project is to prepare the operator to deal with any commercialization activity with the highest regard to ethical, professional and procedural practices to improve the business environment and reduce the operational risks of the companies. He observed the course will be geared to the power generation and distribution professionals of operators and others.

The first course should begin in September, in partnership with the Fundação Getúlio Vargas (FGV) in São Paulo. “We expect the course to take place in three modules: the first for operators, the second for contract managers, and the last for energy commercialization specialists. Although it will begin in São Paulo, we intend it to spread to other states as well”, says Amorim.

Upon completing the course, Abraceel plans to certify participants in order to attest to the quality systems and governance of operations to create a safer atmosphere for the open market.

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T&B Petroleum # 29

35

professional profile

boy Robson Campos

Golden

by Cassiano Viana

The first Brazilian president of Wärtsilä of Finland in Brazil, market leader in engines and propulsion systems, Robson Campos celebrates 20 years in the company. He has been with Wärtsilä since 1990, the Finnish company’s first year in Brazil. He began as an office boy and after six months in another company, he returned to take on the challenge of consolidating the company’s position in Brazil.

The professional story of Robson Campos is inseparable from that of Wärtsilä, which has been in Brazil since 1990. A married father of two, born and raised in the Catete neighborhood of Rio de Janeiro, his story is a true success story. At 40 years old, he is the first Brazilian to assume the presidency of the company he started to work in as an office boy while studying Law at the Federal University of Rio de Janeiro (UFRJ) in the downtown campus.

“On the eve of taking the college entrance exams, I was in doubt whether to study Law or Economics, since I had always had a way with mathematics”, remembers the executive, who started university at 19 years old at the college of Law, and one week later got a job as an office boy at Wärtsilä.

All of this happened at the very beginning of Plano Collor, a plan of economic reform measures to stabilize inflation. Created during the presidency of Fernando Collor de Mello, the plan combined liberal economics with some radical measures.

“Anyone who remembers that time knows all too well it was horrible: there were no jobs. My mother had just died, and my father had to take care of three children and my grandmother. I was just praying to finish high school... so that, afterwards, he wouldn’t worry anymore; I would start to work”, he remembers. “The first job opportunity to come about was as an office boy in a company that was setting up here in the country.”

A detour – The law student had never imagined he would get so far. In 1992, two years after starting at the Finnish company, he was promoted to financial assistant, which “took me far from the legal 36 T&B Petroleum # 29

area.” Three years later and at just 25 years old, he assumed his first management position, in the financial controller area of the company.

“Upon the first promotion, I got married”, he remembers. “I put college on hold one year; afterwards I returned and graduated in 1996. Since I was the only lawyer in the company, I ended up also assuming the legal area of the company.”

“I worked a lot with the financial part of the company at the beginning of my career. In our market, we deal with complex contracts, financial investors and investment funds. Having this experience and knowledge of how the market works is fundamental to work today”, he states.

From that point onwards, it was only a question of time before this executive started assuming new positions. In the middle of 1998 – the year his first daughter was born – he was not only controller but manager of the Wärtsilä Rio Negro Master Power Plant in Manaus (AM), where he coordinated the implementation of the world’s largest thermal plant, at the time, the Rio Negro Mill, with an installed capacity to generate 156 MW. “Life in Manaus was an interesting experience, personally and professionally: living in a different place, facing the North of the country, at the time a much smaller city than it is today”, he reminisces. “I was very wellcome in Manaus and I get along with the people there very well. I made a lot of friends, and I go there often, and not just for professional reasons”, he states.

The only problem was the weight he put on at the time. “I gained 20 kilos! I was weighing 112kg! Obviously I was on the

upswing, and I take out a lot of stress and anxiety on food. In 2007, we started a new project, a work group to deal with the energy auctions, and I started to go on a diet. I wanted to change my life at the time”, he remembers.

While the size of the company and the installed capacity of Wärtsilä doubled, he lost 22kg... and started his major hobby:

Age: 40 Graduation: Law 1st job: Bob’s. In Wärtsilä: office-boy Main positions held: controller, director of Development and Financial Services, Regional Director of Energy,responsible for Mercosul, VP of Eletricidade do Brasil S/A and president of Wärtsilä Average daily working hours: 12 Hobbies: running and horseback riding Childhood wishlist: Autorama Current wishlist: Moto Yamaha V-Max Favorite Music: Halo, Beyoncé, Velocidade da Luz, Revelação Favorite place to rest: Fazenda do Serrote in Santo Antonio do Aventureiro, MG Favorite films: Schindler’s List by Steven Spielberg Books: any by Ruben Fonseca and “The Schopenhauer Cure” by Irvin D. Yalon

running. “Today I run the half marathon. My life changed due to running.”

Pure energy – Back to Rio de Janeiro in 2000, he assumed the financial area of the Energy Projects division of Wärtsilä.

Since he already knew well the practices of the financial area, but was not familiar with the theoretical basis, he started his post-grad course in Corporate Finance at IBMEC (the Brazilian Capital Markets Institute) that same year.

In 2003, at the age of 32, he became the regional director for the Energy division for Mercosul, and successfully led the company to significant growth.

In three years, the division had six managements and 34 sales representatives, managing contracts, managing projects and logistics. The division was responsible for implementing 11 thermoelectric plants in Brazil.

“We had to set up a structure to keep up with the expanding Brazilian energy market. Today, the area is responsible for 10% of the company’s global revenues”, he states.

According to Robson, another important highlight in his career was the conclusion of energy projects in Argentina and Uruguay, specifically the construction of Uruguay’s first thermoelectric plant: a mill generating 80 MW was the result of an agreement with Teyma Uruguay and Saceem, which included the construction, equipment supply, operational services and maintenance.

In 2009, he was invited to be the executive director and professionalize the management of Eletricidade do Brasil, a power company headquartered in Recife T&B Petroleum # 29

37

professional profile

(PE), which has six thermoelectric mills: five in the Northeast and one in Amazonas, where he was responsible for all the operations and new business areas.

After seven months, in May of this year, he returned to Wärtsilä to assume the presidency.

“The fact that I have known the company for so long gives me the assurance to act. I know the market well, I am aligned with the company policy, and I know well the head and spirit of my colleagues.”

The secret is flexibility – His law degree proved useful: “mainly the knowledge of how public administration works, as well as the laws and regulations that control the economy in general. The energy market, which is the area that I know best, is essentially financial and legal. In general, our clients in the energy field are,

38 T&B Petroleum # 29

for example, investment funds and banks that see investment opportunities.”

At no time had I ever felt any prejudice for not being an engineer. “After so much time in Wärtsilä, still no one, in or out of Brazil, has discovered that I am not an engineer”, he jokes. “It usually catches people by surprise, but I have never felt any prejudice.”

And they say Cariocas don’t leave Rio – “I did it twice, but

I never thought that the move would be permanent. I always knew that sooner or later I would return to Rio. But I am easygoing, professionally, I go where I am told; I adapt easily; I am happy.” Even in Finland? “Even in Finland.”

Like any good Cancerian, outside of work, it is his family and two daughters that give life meaning. “It makes you work harder; you have concrete motives to live for”, he points out.

Beach, parks, walking in Lagoa, being outdoors. At weekends, anything goes except for staying in. But weekends usually begin on Fridays with dinners among friends. “We’ve got a gourmet group going, and once per month one of us has an open house and cooks for all. Besides running, food is another hobby; fortunately I don’t practice it as much as I would like.”

products and services

Expro

Expro strengthens presence in Brazil The significant opportunities that exist in the Brazil oil and gas market are ideally suited to the portfolio and expertise of leading international oilfield services company Expro. The company already employs more than 200 people in Brazil and is planning to break ground on a new facility in Macae during 2010 which will further enhance its presence and capabilities in this exciting region.

With most of the world’s ‘easy’ oil already extracted from onshore and shallow water reserves, deepwater exploration and production is now the focal point for many operators in the global oil and gas industry. Deepwater environments, such as in Brazil, brings fresh challenges in terms of new technology advancements.

Expro’s investment and track record in developing subsea technology means that the company is a major player in the deepwater industry. Expro is a market leader in subsea landing string technology, with an established track record in the deepwater regions of the world, including Africa, the Gulf of Mexico and Brazil.

Ensuring safe operations becomes more challenging as deepwater environments present harsher operating conditions in terms of pressure, temperature and requires optimum equipment reliability. For example, maintaining well control throughout well commissioning and intervention processes is vital and temporary subsea safety systems (landing strings) are deployed for this purpose.

To meet the challenges of such deepwater operations, Expro developed its range of Expro Landing String Assembly (ELSA) technology, including the large mono-bore ELSA high debris (HD) and the ELSA high pressure (HP) systems as well as ELSA dual bore (DB), all of which are used in conjunction with the

Express 7 electro-hydraulic (EH) controls to meet the specific needs encountered in deepwater environments.

“Expro’s well flow management products and services complement Brazil’s needs,” said Hank Glansbeek, Region Business Development/Technical Manager, Expro Latin America. “Our ability to complete subsea wells using our large bore technologies, which are suited for deepwater plays, is the ideal solution for the Brazilian market.

“So far, Expro has introduced a small portion of our entire product portfolio in Brazil, but we are continuing to develop new technologies and bringing in new products frequently. We expect many new opportunities as our portfolio of products and services increases in the local market.”

Expro also has an established global reputation for the manufacture and delivery of market-leading subsea connector and measurement technology. Connectors & Measurements in Brazil is continuously improving its presence in the country in order to provide an enhanced level of services and a world-class team to support Expro’s customer base.

Expro is soon to introduce a groundbreaking system which will provide a step change in the way operators can access and intervene in their subsea wells.

Expro’s AX-S (pronounced ‘access’) deepwater intervention system is one of the most significant and innovative pieces of technology the subsea industry has seen.

Current methods for servicing subsea wells generally require the use of a rig to be positioned above the well while this work is carried out, which is a timeconsuming, costly activity.

AX-S provides a safe, riser-less and remotely operated subsea well interven-

Photo: Divulgação Expro

Company’s full package of solutions ideal for South America’s largest country

tion solution, which is deployed from a boat. The system, which will be launched this year, is the first intervention technology which can operate efficiently at depths up to 10,000ft (3,000m), allowing operators to significantly increase production rates and ultimate recovery from subsea wells.

Expro first established a presence in Brazil in 1995. The acquisition of PowerWell Services in 2006 greatly enhanced Expro’s footprint in Brazil, giving the company well testing and subsea capabilities and a strong equipment rental business. This provided Expro with an enhanced business base and has allowed the company to introduce additional products and services.

“We are moving from a business model that evolved around equipment sales to one that gives us the ability to offer whatever our client needs, whenever and wherever it is needed,” Glansbeek said.

He is an oil & gas industry veteran who joined Expro in 1993. Glansbeek brings a wealth of offshore and well testing experience, having recently held management positions for Expro in the UK and the Gulf of Mexico.

Expro’s goal is to become a complete well flow management service provider, as the company introduces additional downhole tools and sampling in the coming months. Glansbeek is confident in Expro’s success in Brazil due to its track record and experience in well testing, as well as a comprehensive set of proven tools to meet the needs of the market place.

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39

products and services

Aveva

Aveva Marine Solutions Continue to Build Momentum in Emerging Shipbuilding Nations Aveva Group, one of the world’s leading providers of engineering design and information management solutions to the plant, power and marine industries, announced that Thai-based The Bangkok Dock Company (1957) Limited, and Indian-based SKA Marine Services Pvt Ltd. have concluded contracts for the use of Aveva Marine solutions within their respective yards.

Established in 1865, The Bangkok Dock Company has a rich maritime history and today is among the country’s leading shipbuilding and ship repair enterprises. The company is considered an important asset for the Royal Thai Navy.

SKA Marine Services is based in Chennai, India, and offers a complete

spectrum of services to ship builders and ship owners including basic ship design, equipment sourcing, preparation and approval of class, statutory and production drawings.

Peter Finch, President, Aveva Asia Pacific, said: “Aveva has long been used by top yards around the world. With countries such as India, Vietnam and Thailand beginning their shipbuilding programs, Aveva is confident that we can support these yards to become more efficient and hence more able to compete with the major players.”

Peter continued: “We are confident that shipbuilding will remain a viable industry within these countries as it has always been interlinked with shipping, which is closely connected to a

country’s international trade. Today we see India’s and Thailand’s exports on the rebound as the global economy improves and industrial production picks up. This is a positive trend for both the countries’ shipping industries, and their shipbuilding and repair activity. Regional naval projects are also playing an integral role in driving the shipbuilding industry. This is especially true in India, which has a thriving naval shipbuilding programme, and where Aveva solutions are currently used to design all ships in the Indian Navy.”

Royal Lankhorst Euronete Group

The Royal Lankhorst Euronete Group starts a new factory in Brazil The Royal Lankhorst Euronete Group starts a new industrial unit in Rio de Janeiro - Brazil. This new industrial unit will be used for production of deep water mooring ropes for the oil and gas platforms, production of maritime ropes for the local market and – at later stage – also for production of buoyancy materials for the oil and gas industry.

The new production facility in Brazil covers around 5,000 m² and is located in the Industrial area of Queimados in Rio de Janeiro in a property of 18,000 m² with easy access to the ports of Rio de Janeiro and Sepetiba.

José Luiz Gramaxo – president/ CEO of the Royal Lankhorst Euronete Group: “It is a new development within our Group to produce there where the market need is.

The Royal Lankhorst Euronete Group has been following the developments of the Brazilian economy in the last few years and we are therefore delighted with this new investment in a production facility in Brazil. We expect the factory to start oper-

ating by January 2011. This development is also in line with the recent investment that was made in Goa - India for the production of twines and ropes for the local fishing market.”

The Dutch/Portuguese Royal Lankhorst Euronete Group employs approximately 1100 people. The company has six worlwide operating divisions - Maritime & Offshore Ropes Division, Fishing Division, Engineered Products Division, Yachting Division, Pure Composites Division and Yarn Division - and several subsidiaries and agents around the world.

T&B Petroleum Newsletter

Every week, on your computer screen, the news from the shipbuilding and offshore industry. Subscribe at www.tbpetroleum.com.br 40 T&B Petroleum # 29

Solomon Associates

Energy consulting company’s studies encompass more than 320 refineries and 85 percent of the world’s refining capacity.

Solomon Associates, the leading performance improvement company for the global energy industry, today announced that it has embarked on its 2010 refinery studies, including the Worldwide Fuels Refinery Performance Analysis (Fuels Study) and the Worldwide Paraffinic Lube Refinery Performance Analysis (Lube Study). The studies enable refineries to identify performance gaps as a basis for improving manufacturing processes and work practices.

“For 30 years, Solomon Associates has been the industry-standard resource for assessing refinery performance and helping refineries to improve operating efficiency,” said Dale Emanuel, president of Solomon Associates. “Our most recent studies in 2008 included 320 refineries representing 85 percent of global refining capacity, and we anticipate continued strong participation in 2010.”

The past two years have been challenging for the worldwide refining industry, with the economic downturn resulting in lower product demand. This has led to record-low capacity utilization and the closure of some refineries, said Bill Trout,

manager of refining studies for Solomon Associates.

“Now more than ever, refineries need to assess their competitive position and find ways to improve efficiency,” Trout said. “Our studies are especially valuable to refineries during down cycles in the industry, as budgetary pressures demand clear identification and quantification of expense reduction and margin improvement opportunities.”

Solomon Associates’ data-driven approach to performance improvement is grounded in years of refining industry experience, the world’s most extensive industry database, and time-proven proprietary and patented methodologies.

Study deliverables are applicable to all refineries, regardless of size, complexity or geographic location.

This year, Solomon Associates for the first time is offering study participants Data Collection Automation.

Through this optional service, Solomon Associates identifies the locations of raw data within the enterprise, and then develops business rules to convert the data into the study require-

Photo: Stock.xcng Image Bank

Worldwide refinery studies, the industry standard for performance benchmarking

ments. Study participants can eliminate hundreds of hours of manual data collection, enabling them to focus on performance improvement rather than the data gathering process.

Interested companies may learn more about Solomon Associates’ refinery studies by visiting solomononline. com/refining or by contacting Bill Trout at 972-739-1733 or bill.trout (at) solomononline.com.

Based in Dallas, HSB Solomon Associates LLC is the world’s leading performance improvement company for energy companies seeking to identify and close gaps in operational performance. Combining proven, patented methodologies with objective data analysis, and led by a team steeped in hands-on operational experience, Solomon Associates consistently helps clients with energy-intensive assets achieve greater efficiencies, enhanced reliability, and improved margins. Solomon Associates is part of HSB Group, Inc.

intellectual property

Protecting new

technology There is a Japanese saying that difficulties are like mountains: they only flatten out once you get past them. And it is exactly by overcoming the difficulties in producing oil from the pre-salt layers on a commercial scale that Brazil will consolidate a position as one of the world’s economic powerhouses in the 21st Century.

S

Saulo Murari Calazans is an intellectual property agent and attorney of the law firm of Dannemann Siemsen.

42 T&B Petroleum # 29

ome of the challenges ahead are: the instability of the presalt layer, which increases the risk of collapsing well; and the slowness of drilling through the resistant carbon rock, where the oil is stored.

Despite the Brazilian industry’s unprecedented technological advances – resulting in a series of record production in deep waters – it is a fact that, in general, the technology employed in the post-salt layers are not enough to deliver satisfactory results in the pre-salt. Although the endeavor will not exactly be starting from scratch, there will be a fundamental need for more modern equipment in order to overcome the obstacles. And it is exactly this challenge that the industry is geared to meet.

It is well-known that the sophisticated levels of technology will require major investments if they are to reach their goals – investments that are made with the degree of return in mind.

When regarding the pre-salt – especially the Santos Basin – there is clearly a lack of infrastructure to made production in the region viable, such as: a specialized workforce; onshore support; supplies; storage; and transport, among others. This region differs from the Campos Basin, where there is already all the facilities necessary for local production. Activities in the Santos Basin will require new facilities capable of transferring upstream production.

This fact has been proven, for example, in the long-duration test in the Tupi field, which is being conducted at a location 300 km offshore, with a helicopter travel time of two hours to reach the site. There are still too few aircraft capable of making the direct flight at the disposal of Petrobras.

One possible solution for the question of distance that is being studied is reducing the number of professionals working on the platforms, by applying new technology for remote operations from an onshore command Center. Naturally, if such a solution were available were so simple, it would already be implemented at other sites. The fact is that it is not simple; it is not cheap; and neither is it feasible in the shortterm. Creating such a solution will require new investments in stateof-the-art technology will be needed in this area.

It is no small exaggeration to say that the expected private investment in new technology will probably reach an all-time high for the industry. Without these investments, the commercial production of the pre-salt area will not get off the drawing board.

Keeping in mind the degree of difficulty in overcoming these challenges, it is paramount that the financial return for the players involved makes it worth the effort as an incentive for these companies to take on activities that are still considered high risk.

It is precisely in this scenario that the professionals in the areas of petroleum engineering, shipbuilding, geology, computer science and others, look to pioneer the most modern equipment, capable of meeting the challenge. The job market is a hot one: the main demand is for young talent that has initiative, a broad vision, and more importantly, the creativity to overcome the obstacles by presenting new feasible solutions for known problems.

Therefore, we arrive at the question: How to deal with new technology in order to guarantee merited financial return and while optimizing profits?

The most well-known path to financial return, after, naturally, profits gained from business itself, is by granting exclusive legal rights to the pioneers who create new technology capable of overcoming the challenges ahead. Therefore, we hope to see an impressive increase in the number of patent protection applications in the area of oil and gas exploration and production, as can be seen in any highly-competitive environment.

A patent, granted by the National Institute for Industrial Property (Inpi), grants the creators who request patent protection, a temporary exclusivity of 20 years to commercialize their invention.

Contrary to what many businessmen believe, the mere development of new technology and placing

it in the market does not guarantee its inventor has the exclusive right to commercialize the product. It is paramount that specific measures be taken in order to obtain a patent, if it is to be protected from the interests of outside parties from using new technology without formal authorization.

Further regarding return on investment, a patent is also an asset, which may also serve as another source of income if conceded to third parties, or licensed via payment of royalties.

The contracts involving the licensing of new technology are ever more abundant and commercially advantageous, as long as is it mutually beneficial: the licensor receives payment for their research and development; the licensee makes legal use of patented technology without having to invest their own resources in its development.

Last but not least, patents comprise a basis of technological information. Most enterprises require patents for their creations and the access to this archive is public, available by simple internet consultation. These documents supply valuable information for research and development of new products and processes, as well as permit the follow-up of competitors’ activities.

It is for no small reason that the most respected companies around the world in all industrial segments have made use of the patent system – and this is particularly relevant in this time when there is a high demand for new technology.

In Brazil, the number of new patent applications has increases gradually, as observed in the statistical database of Inpi (www.inpi.gov.br). In sum, innovating without protection may mean money lost.

“SCHMIDT, VALOIS, MIRANDA, FERREIRA & AGEL – ADVOGADOS (“SVMFA”) is a Brazilian law firm recognized by its peers and clients for its outstanding expertise in “Natural Resources & Infrastructure”. SVMFA was formed by five partners with large experience in the representation of domestic and international clients in Brazil and other countries. SVMFA and its partners have been consistently top ranked in “O&G” by the most prestigious international research institutes such as Chambers and Partners (Global and Latin America), Latin Lawyer, Who´s Who Legal, Euromoney and Best Lawyers.

SVMFA has an association with the prestigious Garrigues Abogados Y Asesores Tributarios, which is the largest Continental European law firm, with 27 offices in Spain and other cities, such as London, New York, Brussels, Lisbon, Oporto, Bucharest, Warsaw, Casablanca, Tangiers and Shanghai.

Our goal is to provide state-of-the-art legal services and we are committed to the highest ethical standards in the representation of our clients.”

Tel.: (55 21) 2114-1700 www.svmfa.com.br

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43

exploration and production

PRE-SALT

Concession, production sharing and power of contractors The rules that settle the decision making procedure in the petroleum exploration and production operations may have more surprising consequences than many people might imagine.

T

Antonio B. A. Sarmento is a partner to Tauil & Chequer Advogados in association with Mayer Brown LLP

44 T&B Petroleum # 29

he influence of those rules on operations performance do not always conform to certain propositions of the government bills of law discussed by the House of Representatives and the Senate.

In fact, the authors of the projects and amendments regarding the presalt laws submitted to the Congress apparently did not even approach the different possibilities contained in the complex interaction usually developed among the parties to a petroleum exploration and production contract.

Petrobras’ position as the pre-salt exclusive operator shall not mean that full powers of decision will automatically be vested on the state company, even so its command may extend beyond the 30% minimum interest granted to it under the law. It is evident that Petrobras will face certain constraints, starting from the question regarding the volume of investments up to the huge operations network it is entitled to carry out, or at least coordinate, leaving aside the natural difficulties inherent to any business as a result of divergent strategies and frequently conflicting technical options.

Further to those hypothesis that are just preliminary but enough to provoke tensions within the operating committees, it is important to take into consideration the determinant factors represented by the investing partners, the specific weight of which makes the power stemming from their greater or minor fraction in the supply of resources required for the operations.

Yet, it is worthy to remember that under any contract regime, whether concession or production sharing, the relationship among parties and their behavior on the day-to-day of the operations follow specific working methods. In general, such rules are addressed by private understandings, outside the regulatory bodies’ control, a current issue as regards the concession contracts executed with ANP.

Illustration: Petrobras Agency

In the concession system, due to a mistake, oversight, lack of experience or obstinacy from some of the people submitting texts and amendments to the original project converted into law 9478/97, it was inserted a mandatory requirement that a “consortium agreement” be created should the title to the concession be granted to more than one party. This flagrant confusion has equally contaminated the present sharing project in the intent to match the provisions applying to the participation of foreign applicants to public services bids under law 8666/93 and its amendments.

In addition to being inopportune, the consortium modeled by Petrobras and adopted as mandatory by ANP would not cover the most primary requirements already consolidated by the petroleum industry in structuring a joint participation in exploration and production ventures. The natural destiny of such consortia has been (and will continue to be) the complete oblivion inside the drawers of the consortium members and its replacement by a business model successfully used by the worldwide experience of the petroleum industry.

Established by the use and known as “Joint Operating Agreement – JOA”, this contract was hastily endorsed by Petrobras as from the very initial associations negotiated before the enactment of law 9478/97 and formalized from 1998, apparently, without a thorough evaluation of its possible inadequacy to the context of the law and the concession contract approved by the ANP as, due to its origin, the JOA is supported on concepts that are not familiar to the Roman-Germanic principles of law.

Flowing from the American side of the “common law”, the JOA does not partake many of the civil law peculiarities. As Petrobras did not make itself timely ready to offer an efficient alternate document, the use of the JOA as the working manual in the associations formed to contract with ANP was just the proclaimed consequence, as this document is currently used under the legal culture of the companies that answered the call for bids.

No doubt the JOA is a detailed regulation incorporating the basic operational activities, allowing these to run without major questionings regarding the actions the operator may or must provide as a counterpart to the rights of the other participants and the obligations they are demanded to comply with.

The JOA grants the operator great power, although subject to limitations balancing the primacy of the main investor (frequently the operator) and reflecting the protection of the parties regarding the risks of the

business and their inclination to undertake it, with support on economic concepts and the state-of-the-art exploratory technologies.

That is why the mandatory participation of Petrobras in the sharing agreements and its position as the exclusive operator, cumulated with the quality vote and veto power attributed to the new Pre-Salt Petroleum SA in the role of president of the operating committee, as provided for in article 25 of the government sharing bill, imply severe restrictions to the joint operations decision-making system, a seasoned petroleum industry pattern.

It is easy to predict that these demanding requirements are destined to turn into obstacles to the attraction of seriously interested domestic or foreign investors, unlikely to be overcome without a thorough revision of the legal hindrances to the decision-making process.

Together with the permanent controversy on the distribution of royalties, the operating decisions at issue may in all likelihood become an additional embarrassment to the difficulties inherent to the sharing agreements, susceptible to determine unforeseeable delays to the government projects, not to mention the polemic legal compatibility of the proposed system with regard to the federative republican model, altogether capable of negatively impact the entire project.

T&B Petroleum # 29

45

repetro

So far, so close It is well-known that Brazil has a tax burden quite high. Nor is it news that this “deadweight” adds significantly to the “Brazil cost”, responsible for the obstacles in our economic development. Though, some rare occasions, the government, specially the Federal Government has struggled to reconcile the budgetary objectives with the desires to stimulate a particular section of the economy.

T

André L. P. Teixeira, an attorney and founding partner of André Teixeira & Associados, specializing in tax issues for the oil and gas industry and legal advice for both domestic and foreign E&P companies.

Bianca de S. Lanzarin, an attorney specializing in tax issues for the oil and gas industry and partner of the law firm of André Teixeira & Associados, responsible for the tax litigation division.

Tiago Guerra Machado, an attorney specializing in tax issues for the oil and gas industry and partner of the law firm André Teixeira & Associados, responsible for the tax planning division.

46 T&B Petroleum # 29

he oil & gas industry, as a highly strategic sector not only in an economical view, but also of national energy sovereignty concern, has been putting forward since the relaxation of state monopoly over exploration and production of hydrocarbons, which culminated in the publication of the Federal Decree 3.161/1999, creating REPETRO special tax regime.

REPETRO, as an element known by almost everyone in this sector, is a complex customs regime, derived from other existing elements: the temporary admission and drawback.

These two institutes, supported by the uncommon element of the “fictitious exportation” or exportation with fictitious movement”, allow that oil companies and their suppliers import machinery and equipment that shall be used in exploration and production of oil and natural gas with total suspension of payment of federal taxes levied on customs clearance.

The objective of REPETRO always has been the tax relief over operations closely related to the exploration and production of oil and natural gas.

Therefore, importation of goods and equipment to be used in upstream operations are levied by ICMS (the Brazilian VAT), which is a state tax, subjected to each jurisdiction.

However, the States have not followed the entrepreneurial view of federal government.

In fact, some States, especially Rio de Janeiro, through the “Valentim Law”, were reluctant to grant VAT exemption over such transactions, although there was legal provision to authorize states to grant tax exemption when the operation was exonerated of federal taxes through special customs regime for temporary (Covenant ICMS 58/99).

As a result, the players and their service suppliers when importing machinery and equipment under the REPETRO regime for their use in fields in Rio de Janeiro continued to suffer an ICMS burden of up to 23.4% over the value of imports, although was granted with suspension of federal taxes.

This annoyance would be extended until the statement of Covenant ICMS 130/2007, which intended to align the tax treatment of VAT to the limits for the application of REPETRO regime, ruled by Normative Instruction 04/2001, which was ruling “federal” REPETRO at time.

This aforementioned Covenant ICMS has granted tax incentives for States to imports of goods and merchandise to be used in the exploration phase (exemption) and production (reduction in effective rate).

For both, this Agreement has limited its application to a categorical list of goods, built from the mentioned equipments in Normative Instruction 04/2001 and other legal acts.

However, shortly after Covenant 130/2007 was in force, the Normative Instruction 844/2008 has been established, regulating REPETRO regime on federal level and revoked Normative Instruction 04/2001, in particular the exhaustive list of goods subject to import under the protection that regime.

Thus, this benefit has to be applied no longer based on a simple list, but the actual nature and purpose of the equipments.

As a result, once again states eventually move away from a common treatment with the federal government.

This is because States are only granting the ICMS exemption or reduction of its calculation basis for equipment clearly listed by ICMS No 130/07; otherwise, even if these goods have federal taxes suspension considering “federal” REPETRO regime, they are charged for ICMS on customs clearance.

Moreover, even if the equipment were included in the Covenant ICMS 130/2007’s list, to be granted with exemption is mandatory that this asset must be relieved of federal taxes, that is, REPETRO (or other federal tax benefit) must be applicable.

Regarding this aspect, it is possible to have goods that they are feasible to get the state tax benefits but were not being considered as such in federal level.

In this scenario, all tax benefits were ineffective. As example, we can mention the risers used in exploration and production.

At first sight, this distortion, even illogical and harmful to the development of the upstream operations in Brazil, country, should not be deemed as an illegal

once that we do not identify any harassment to the Principle of Legality, which foresee that government acts should be limited under our legislation determines, especially because the granting of tax benefits are not a legal obligation itself.

Thus, the oil companies, their contractors and subcontractors, despite of granting of REPETRO at federal level, with total suspension of payment of federal taxes over imports, unfortunately are forced to fully collect state VAT for the customs clearance of these equipments.

An alternate solution that has been adopted by E&P players is importing equipment through the special customs regime for temporary use, fixed by Normative Instruction 285/2003 (Temporary Admission).

Nevertheless, in this special customs regime is required the payment of federal taxes, as well as the ICMS (under ICMS No. 58/1999); in proportion to the time of stay of each equipment in Brazil, increasing at a significant cost the operation.

To better illustrate, there is below a simplified calculation of the cost of importing the same equipment to be used in the production of petroleum/natural gas when performed under federal REPETRO, with the full payment of state VAT (ICMS) e no federal taxes, and over Temporary Admission, with payment proportion of the federal and state taxes.

As we can realize on the table above, in the opposite way of REPETRO was created, importation of machinery and equipments for the upstream operations may suffer a high tax burden, due on the lack of alignment between the federal and State tax legislations.

The belated attempt to solve the problem by ICMS 130/2007 in some cases failed precisely because the ICMS legislation remained aligned with the federal taxes only for some months.

Therefore, even though we are so close to a solution that integrates taxation in this sector, there is a long way to go towards that the legislation of the States reflects the limits imposed by REPETRO. T&B Petroleum # 29

47

ore carriers

Single-pour/single pass loading An innovative concept for a new generation of ore carriers

V

Ricardo Barreto Portella, is a Naval Architect graduated at the Federal University of Rio de Janeiro (UFRJ) has a Master Degree in Ocean Engineering at Coppe – UFRJ (2000) with specialisation in Mooring Systems Design and Analysis. He is the Head of the Naval Architecture and Hydrodynamics Department in Projemar since 1995 where is responsible for the development of conceptual and basic design of floating offshore structures and ships.

Luiza Ferreira Andrade, is a Naval Architect graduated at the Federal University of Rio de Janeiro (UFRJ) Works at Projemar as a Design Engineer in the Naval Architecture and Hydrodynamics Department since 2007. Today, she is responsible for the development of all analysis related to Single-pour/Singlepass loading concept.

48 T&B Petroleum # 29

ale is the biggest mining company in Brazil and one of the biggest iron ore producers in the world. The core business of Vale is to sell ore products but, as part of their core business logistic chain, Vale operates not only their mines but also railroads, ports and ships.

In this context, due to their natural restrictions, the ports play a key role as interface between land and sea. As much as the lay-out and facilities of the ports are improved, bigger is the efficiency of the whole logistic chain. In most cases operating costs and capital costs may be significantly reduced by better planning and coordination of the ship operations to consider the port’s infrastructure and optimize their activities.

In order to optimize the port operations, the process of the ship design can be changed and, instead of designing the optimal ship port-to-port, the ship can be designed in the best way for the total transport system.

Since 2004 Projemar and Vale have been working together to design an efficient ship not only for the voyages between the loading and discharge ports but also to consider the benefits that can be introduced in the logistic chain due to an efficient port operation with a ship designed for the existing and future port infrastructure.

One of the main results of this joint development is the “SinglePour/Single Pass” concept that has been applied to the design of the new 400,000 DWT ore carriers that are being built for Vale Fig. 1 – Ship being loaded at PDM terminal in Chinese and Korean shipyards and to the 80,000 DWT Bauxite Carrier that are being built for LOG-IN in Brazil.

Problem presentation One of the main problems that affect ports operation worldwide is the big waiting time of the ships

Fig. 2 – Iron ore shiploader

that reaches about 12% of the global fleet around the world at any given moment. At Brazilian iron ore ports the time waiting average was of 6–8 days during 2006–2008.

Vale operates two main terminals in Brazil where their iron ore products are loaded to the export ships: one located in the Southeast of Brazil (Tubarão) and one located on the Northeast of Brazil (Ponta da Madeira). Both terminals are of deep draft and are equipped with shiploaders capable to reach loading rates up to 16,000 t/h.

Presently, in order to improve the capacity in Ponta da Madeira, Vale invested in the construction of a new berth (Pier 4) also equipped with a shiploader capable to reach loading rates up to 16,000 t/h. But even operating such big terminals with such capacity, Vale faces severe problems with ship’s waiting time and long queues on their terminals.

The loading time of a ship is not only a consequence of the terminal capacity to load the ship, but also a consequence of the ship capacity to receive the cargo from the terminal. For example, when loading a standard capsize ship with 170,000 t of iron ore, it is necessary to execute about 3 (three) pours in each of the 9 (nine) holds of the ship, resulting in 27 (twenty seven) movements of the shiploader or about 13.5 (thirteen and a half) hours spent only moving the shiploader from one hold to the other.

In view of this, Vale invited Projemar to jointly face the ships loading time problem investing in a new and revolutionary design concept in such a way that the loading operation of this new ship would cause a significant improvement on the port operations, speeding up the queue.

The main idea behind the new concept is to have a ship that is able to safely take the high loading rates of the Vale ports, with each hold loaded in one single pour in order that the ship can be fully loaded in only one pass of the shiploader.

The main result of this jointly development is the Very Large Ore Carrier (VLOC) ship of 400,000 DWT, the ValeMAX, that is being currently built in Chinese and Korean shipyards. These huge ships have 7 (seven) holds that are loaded in one single pour each, i.e., with only 7 (seven) shiploader movements, spending only 3.5 (three and a half) hours moving the equipment, the expectation is to have the new ValeMAX type vessels being fully loaded at the same time of a standard Capesize vessel.

The beginning As explained above, the ship loading is a time consuming port operation and a cause for concern on the Vale seaport terminals. For the terminal, a long time or a delay on the execution a ship loading operation implies on an increase waiting time on the queue of ships that usually results on demurrage fees to be paid by the terminal.

In fact, efficient ship loading operation is a strong requirement on all Vale terminals, where ships that do not comply with certain minimum requirements are not anymore allowed to berth and load The Vale terminals have equipment and infrastructure capable of allow quite good loading rates, but most of the ships that operates on these terminals are not capable of being loaded in an efficient manner, mainly due to the ship design philosophy, where the ships require an average of 3 (three) pours in each hold to balance the forces induced by the incoming cargo and reduce the likelihood of over-stressing the hull structure.

With the strategic decision of Vale to re-start the operation of their own fleet of ore carriers, it was also decided that these new ships should be designed to be the most efficient ships operating at their ports. At this moment Projemar won the design competition to develop the new ore carriers design based on a new and innovative design concept where the ship is not an unique system, but a part of a complex logistic chain where the week link is the port operation efficiency.

The Single-Pour / Single-Pass loading concept is based on the simplicity idea that the quickest way to full a ship hold of iron ore is to do it continuously. So the ship design must be developed to allow the cargo loading just one single pour in each hold and the only way to do this is to consider this as a requirement in the initial stage of the ship design.

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ore carriers

The single-pour/single-pass loading During a typical loading operation of a capesize ship, for example, up to 3 (three) pours are usually required in each hold in order to control the forces induced by the weight of the incoming cargo and to reduce the likelihood of over-stressing the hull structure.

But, as already mentioned, in the SinglePour / Single-Pass loading, the ship shall be fully loaded in one pass of the shiploader by loading each hold using just one pour. This method reduces significantly the loading operation time but can lead to much higher levels of structural stresses.

The amount of cargo loaded into an individual hold using the Single-Pour / Single-Pass method can cause potential structural problems like excessive bending moments due to the cargo distribution, excessive shear forces due to the difference of weight, especially between a full hold and an empty hold, and excessive deformation of the section in way of the hold if an insufficient draft is presented.

If the Single-Pour / Single-Pass method of loading is desirable during the operation, the ship shall be prepared to allow those higher levels of structural stresses and must be equipped with a system capable of aiding in the control of these stresses.

So, as one of the main concerns about the Single-Pour / Single-Pass method of loading is to enable the loading of the ship in such a way as to avoid the creation of any unacceptable stresses in the ship’s structure, attention is paid to the considerations listed bellow during the ship design: Design of the ballast system to allow a ballast control synchronized with the cargo loading.

Reinforcement of the ship structure to allow the stresses caused by the operation; The shiploader rate and the time spent due the equipment movement between the holds determine the total time of the loading operation. Loading operation shall not be interrupted for the execution of ballast movement, meaning that all ballast movements shall be made simultaneously with the cargo loadings to guarantee that the entire operation will be executed in the minimum possible time.

In view of this, the complete ballast system design (ballast pumps, line diameters, connections, stripping system, etc) must comply with the necessary ballasting and deballasting rates for the port operations.

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Fig. 3 – Section deformation during loading

Besides that, the ballast system has to be able to control the hull girder stresses (bending moments and shear forces) induced by the weight of the incoming cargo and also to control the ship´s drafts and trim as per the port limitations in terms of quay drafts and air-draft.

The ballast movements, synchronized with the cargo loading, are the key to balance the forces during the operation and to control the ship equilibrium. The main idea is to design a ballast system that allows a flexible and efficient ballast movement.

An efficient ballast system design does not exempt the ship structure from being reinforced.

But, thanks to the control of the structural stresses by the ballast movement synchronized with the cargo loading, the amount of extra steel needed over conventional ship designs is less than 1% (one percent).

The reduced amount of steel added to the ship structure due to the adoption of the single-pour / single-pass method shows the viability of the method and explains why it is now considered mandatory for all Vale new big ships.

Regarding the design of the hull structure, the key issue is to direct face the over-stressing problem since the early stage of the design because even considering that the hull girder stresses generated by bending moments and shear forces are well controlled by an efficient ballast system, the over-loading in a hold can cause an excessive deformation of the bottom, transversal bulkhead and cross deck in way of the ship hold if there is an insufficient draft to aid in the forces balance.

To avoid this excessive deformation and to allow the single-pour of a hold it is crucial that adequate Hold Mass Curves are developed in an early design stage based on well defined loading and unloading sequences.

single-pour/single pass loading

These curves are used to show the maximum permissible and the minimum required cargo mass of each hold and of adjacent holds for different values of midhold drafts. In fact, the Hold Mass Curves present the mass of cargo for which a hold is designed to be loaded at a certain draft and it would be impossible to define a viable single-pass loading sequence without defining adequate Hold Mass Curves for the port operations.

As the Hold Mass Curves need to be defined for both “harbor conditions” and “seagoing conditions”, in order to have a proper design of the hull structure adequate to the Single Pour / Single Pass method, one of the most important activities during the initial design stage is the development of a complete set of consistent loading conditions, including seagoing conditions, ballast water exchange conditions and loading / unloading conditions that reflect the ship´s operational behavior.

Based on these curves the designer will have an adequate loading pattern to allow the development of the hull structure, which shall be based on a Finite Element Analysis (FEA).

Fig.4 – Concept of a 600,000 DWT ULOC single-pour / single-pass operation at Tubarão Port

The continuous search for high efficiency in loading and unloading operations at ports is creating a new generation of ore carriers able to safely take loading rates as high as 16,000 t/h using the innovative Single-Pour / Single-Pass Method where each hold is loaded in one pour and the ship is entire loaded in one pass.

The main class societies are nowadays developing new specific class notation dedicated to these port friendly ships: the Det Norske Veritas (DnV) created the Easy Loading Notation EL2 and a Lloyd Register (LR) notation is already being developed.

coffee break

Sergio Sergio Rodrigues Rodrigues

by Orlando Santos

Photos: Divulgation

a designer a designer from the tropics from the tropics The Delta Larousse encyclopedia defines him as the creator of modern furniture in Brazil, citing his famous creation, the soft chair, a hallmark of Brazilian furniture. Although it was the first piece of Brazilian furniture to receive an international prize, the designer and architect, Sergio Rodrigues, is known for his characteristic simplicity – often the mark of a great artist.

Sergio Rodrigues – a designer from the tropics Caixa Cultural Rio de Janeiro – Galeria 3 Av. Almirante Barroso, 25 – Centro (metro: Carioca) Tels.: 2544-4080 / 2544-1099 / 2544-7666 Visitation: from August 10th to September 19th, 2010. Tuesday to Saturday: 10:00 am to 22:00 pm. Sunday: 10:00 am to 21:00 pm.

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An exhibition of the artist will be on display at Caixa Cultural, in the Center of Rio de Janeiro, through September, curated by Marta Micheli and Verônica Rodrigues, the designer’s daughter, under the title Sergio Rodrigues – Um designer dos Trópicos. The show will bring to the public a little known side of the artist’s creative process, besides the famous pieces of furniture, such as the soft chair, created in 1957 and that had a version awarded in 1961 at the famous Concorso Internazionale Del Mobile in Cantú, Italy.

With almost 70 pieces displayed, the exhibit shows the interconnection between the artists work and the history of Brazil from the point of view of Sergio Rodrigues, showing the playful and the unorthodox, exposing

the origins behind the furniture – its context, its history.

Together with Lúcio Costa (urbanist), Oscar Niemeyer (architect) and Roberto Burle Marx (landscape artist), the furniture designer Sergio Rodrigues, as he like to be called, completed the interiors of the buildings of the Brazilian capital with his essentially Brazilian style.

Constantly in the spotlight until today, the work of Sergio Rodrigues can be found in important projects in Rio de Janeiro, from the old Manchete to the modern Hotel Fasano, not to mention other commercial, institutional and residential establishments The soft armchair – The history of the creation of the soft armchair was recently remembered by its designer in an interview in the Eu section of the newspaper, Valor. Everything began when photographer Otto Stupakoff asked him to create a sofa – later becoming an armchair –

The DIZ armchair

The KILIN armchair

which Otto could throw himself upon to rest. That was how the Sergio’s most famous creation came to be.

The armchair is made of a cushion ingeniously fastened by leather belts to a sold wood frame of jacaranda, in the 1960s, and today made with certified wood. It is currently sold for prices much higher than US$ 8,000. People line up to buy them – much to the contrary of when he began.

Otto had no money to buy the piece he had ordered, and only got the armchair because Sergio sold it to him at cost. At first, it was not easy to find buyers for what is today

A CARIOCA ARTIST Born in 1927 in Rio de Janeiro on Joaquim Nabuco St, between the neighborhoods of Copacabana and Ipanema, Sergio Rodrigues is carioca – a native of Rio. In 1947 he started university at the Faculdade Nacional de Arquitetura da Universidade do Brasil. After graduating in 1952, he participated on the team for the project of the Centro Cívico, in Curitiba, PR. He worked in São Paulo at Forma. One year later, he returned to Rio and founded Oca, a store, art gallery and Studio all in one, which became a meeting place of the intelligentsia carioca.

In 1956, he opened a factory in Rio de Janeiro called Taba. Besides furniture for various ministries in Brasília, he received orders from the government in order to show Brazilian furniture abroad. The most significant project was for the Brazilian Embassy in Rome in 1959.

In the 1960s, Sergio developed a pre-fabrication system in wood, having, at the invitation of the UNB,

a highly sought piece of furniture that had only become successful after the Italian award.

The DIZ armchair, his wife’s favorite, was put on display at the 2009 Rio França Contemporary Design exhibition at the Centro Cultural dos Correios. It is one of the highlights of the Caixa Cultural exhibition. According to his wife, the armchair is hard… but comfortable.

The show even has a surprise for visitors: an unprecedented piece of furniture created by Sergio Rodrigues – yet another reason not to miss the show that will go on through September 19th.

mounted several units in Brasília, and more than 200 modules around the country.

In 1961, he registered the soft chair for competition in the IV Concurso Internazionale del Móbile in Cantú, Italy, and won among 438 competitors from 27 countries.

Shortly afterwards in 1974, the soft chair became part of the design collection of the Museum of Modern Art in New York City. In 1989, his work had been awarded the Lápiz de Plata Prize at the Bienal de Arquitetura of Buenos Aires. In 1993, he participated in the Convegno Brasile in Brescia, Italy.

In 2004, he received from Itamaraty (the Brazilian Foreign Office), the Rio Branco Medal in Brasília. In the same year, his work was the theme of the individual exposition at the R 20th Century Gallery in New York, which was repeated in 2009 due to popular demand. At the same time, he was also exhibited at Galeria Espasso, also in New York City.

The success of the soft chair was such that if upstaged recognition from some of this other creations, some of which were much more significant due to their design solutions.

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meeting

September

12 to 16 – Canada WEC – World Energy Congress Local: Montreal Phone: + 1 (514) 397-1474 Fax: +1 (514) 397-9114 www.wecmontreal2010.ca 13 to 16 – Brazil Rio Oil & Gas Expo Local: Rio de Janeiro Phone: 55 21 2112-900 Fax: 55 21 2220-1596 congresso@ibp.org.br 19 to 22 – Italy SPE Annual Technical Local: Firenze Phone: 972 952 9393 Fax: 972 952 9435 spedal@spe.org www.napeexpo.com 20 to 21 – USA NPRA Environmental Conference Local: San Antonio, Texas Phone: 202 457 0480 Fax: 202 457 0486 info@npra.org www.npra.org 27/09 to 1o/10 – Italy IPLOCA Conference Local: Venice Phone: +41 22 306 02 30 Fax: +41 22 306 02 39 info@iploca.com www.iploca.com

October

4 to 6 – Qatar Power-Gen Middle East Local: Doha Phone: +44 (0)1992 656 610 Fax: : +44 (0)1992 656 700 www.power-gen-middleeast.com kelvinm@pennwell.com 5 to 7 – Brazil Usinagem 2010 Local: São Paulo Phone: +55 11 3824-5300 Fax: +55 11 3666-9585 info@arandanet.com.br www.arandanet.com.br/eventos2010/ usinagem/index.html

5 to 8 – Kazakhstan Kazakhstan International Oil & Gas Local: Almaty Phone: +44 0 207 596 5000 Fax: +44 0 207 596 5106 oilgas@ite-exhibitions.com www.kioge.com/2010/ 10 to 13 – USA NPRA Q&A and Technology Forum Local: Baltimore Phone: +1 (202) 457 0480 Fax+1 (202) 457 0486 info@npra.org • www.npra.org 11 to 14 – Bahrein Petchem Arabia Annual Meeting Local: Manama Phone: +44 0 1242 529 090 Fax: +44 0 1242 529 060 wra@theenergyexchange.co.uk 11 to 14 – Singapore Downstream Asia 2010 Local: Manama Phone: +44 0 1242 529 090 Fax: +44 0 1242 529 060 wra@theenergyexchange.co.uk 19 to 20 – Brazil Endutos Local: Rio de Janeiro Phone: +55 11 5586 3197 Fax: +55 11 5581 1164 eventos@abendi.org.br www.abendi.org.br 25 to 29 – Brazil Sobena 2010–Exponaval Local: Rio de Janeiro Phone: +55 21 2283-2482 sobena2010@sobena.org.br www.sobena2010.org.br

November

1 to 3 – UAE 2nd World Refining Technology Summit 2010 Local: Abu Dhabi Phone: 0091 98 1102 6635 Fax: 0091 98 1102 6635 m.shah@standardboard.com www.standardboard.com/wrts2010

Send your release to: tnpetroleo@tnpetroleo.com.br.

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1 to 5 – South Africa 17th Africa Oil Week Local: Cape Town Phone: 0044 20 7434 9944 Fax: 0044 20 7439 8975 http://www.petro21.com/events/ index.cfm?id=498&tc=AU 2 to 3 – Kazakhstan OilTech Mangystau 2010 Local: Aktau Phone: 00971 4433 2972 Fax: 00971 4438 0255 graeme.coombes@ite-exhibitions.com www.oiltech-mangystau.com/2010 3 to 4 – USA Offshore Communications 2010 Local: Houston Phone: 001 301 354 1778 Fax: 001 301 340 7136 lfuller@accessintel.com www.offshorecoms.com/ 08 to 10 – Turkey Natural Gas Distribution Turkey 2010 Local: Ankara Phone: 00971 4 364 2975 Fax: 00971 4 364 2975 enquiry@iqpc.ae www.naturalgasdistributionturkey.com 29/11 to 2/12 – Spain 11th Annual World LNG Summit 2010 Local: Barcelona Phone: 0044 20 7978 0000 Fax: 0044 207 978 0099 http://world.cwclng.com/ lng@thecwcgroup.com 30/11 to 3/12 – Monaco DOT Manaco 2010 Local: Monaco Phone: 0044 0 1992 656 647 Fax: 0044 0 1992 656 700 sneighbors@pennwell.com www.deepoffshoretechnology.com

December

12 to 15 – Egypt Production Optimization North Africa 2010 Local: Cairo Phone: 00971 4 364 2975 Fax: 00971 4 363 1938 enquiry@iqpc.ae www.productionoptimizationafrica.com

opinion

of Haroldo Lima, General Director of the ANP – National Agency of Petroleum, Natural Gas and Biofuels.

It’s time

for the pre-salt and the small oil and gas producers

Now that most of new regulatory framework for the pre-salt has been approved by Congress, Brazil is ready to start a new era in its economic history.

I

am quite certain that our country will benefit immensely from exploring the new reserves by accelerating growth, investing in strategic segments such as education, science and technology, sustainable development and combating poverty. In the next few years, I am certain we will see Brazil transform into a major producer of oil and gas and into exporter of oil derivatives, further strengthening the industry.

We have undoubtedly reached the time for the pre-salt, but we have also reached a turning point for the consolidation of the small and medium oil and gas producers. As T&B Petroleum Magazine has shown in its most recent issues, a group of enterprises have been battling to maintain and increase their oil and gas production – whether in Bahia, Sergipe, Alagoas or Rio Grande do Norte. The companies represent employment opportunity and improvements in some of the poorest regions of our nation, and at the same time, they are important to the domestic industries, especially in the equipment supply segment, which has found a significant opportunity to diversify their activities with these small- and medium-sized oil and gas companies – sales to this industry has reached US$ 1bn since 2003, according to the Brazilian Association of Independent Oil and Gas Producers (Abpip).

Since that time I have been giving warning about the importance of having a segment of small- and medium-sized oil and gas companies. In 2005 and 2006, the ANP held two bid rounds for Marginal Accumulation Areas. New rounds have not been held because the ANP does not have any new areas at the moment, but that does not mean they do not exist. In Bahia, according to research of the Federal University of Bahia (Ufba), there are some 1,600 and 1,800 under-utilized or virtually inactive wells.

The oil and gas that can still be found in these fields, where exploration is not economically advantageous to big oil companies, cannot go to waste.

The USA and Canada have, respectively, 7,000 and 1,500 small- and medium sized companies, which together create more than 300,000 jobs and produce 2m barrels of oil per day.

We are still far from these numbers here in Brazil. In January 2010, there were 23 smalland medium-sized oil companies collectively producing around 1,700 barrels per day, repreT&B Petroleum # 29

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opinion

senting less than 1% of today’s national production. However, it is proven that each job created by these oil and gas companies equals the creation of ten new service render jobs: I reiterate that the marginal fields are mostly located in the economically poorer areas of the Brazilian Northeast.

However, all the effort that has gone into creating an industry for small- and mediumsized oil companies is under threat. The companies face immense difficulties. Engepet in Sergipe, for example, has no choice but to send its oil to Univen in São Paulo – more than 3,000 km far – since Petrobras (just under 200 km away) refuses to buy its oil, alleging lack of capacity, although the local unit is operating on idle capacity. Instead of spending US$ 2,000 per year on freight, Engepet spends US$ 20,000.

The lack of new areas to offer also inhibits these companies from increasing their production and making new investments. If things continue at this rate, the lack of opportunities will suffocate most of these companies in the

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mid-term, and consequently, increase the number of idle oil wells and fields in marginal areas.

Another company plans on drilling new wells in its field, but has postponed investment due to uncertainty about the future of the industry.

We simply cannot lose this opportunity. If these small- and medium-sized companies don’t make it, it will be the residents of Mata do São João, BA or Cidade de Brejo, SE who will be the losers. These cities have already opened up restaurants, inns, and other services in order to meet the needs of the companies exploring the marginal fields. Many other cities have not even had this opportunity because the already existing wells remain closed.

As I had mentioned in the beginning, it is time now for the pre-salt, which will dramatically change Brazil. However, we are at a crossroads for the smaller oil and gas producers – and they have been improving the lives of many Brazilian in the countryside of the Northeast. Brazil needs both of these industries: big oil for the pre-salt and microindustry of small- and medium-sized oil producing companies.

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