Brazilship/Scanbrasil: progress through partnership
Damen has long been involved in Brazil. With its long coastline, vast inland waterway network and its offshore energy resources, Brazil offers great potential to foreign companies that are willing to work there in a spirit of cooperation and partnership. Damen’s Technical Cooperation programme has been a particular success with the group working with local shipyards on a range of projects from PSVs to offshore patrol vessels. However in a maritime sector of such size and diversity there are many routes of access to be explored, and so Damen has developed a valued relationship with leading Brazilian shipbroker Brazilship/Scanbrasil. Supporting shipowners, charterers and other market participants across South America that are active in principally the tank, chemical & gas, dry cargo and offshore markets since 1988, the company has its finger on the pulse of these sectors and exceptional knowledge of the forces that drive them.
Brazilship/Scanbrasil supports Damen on three distinct objectives for the mutual benefit of both parties. The identification of newbuild projects that the Damen portfolio can support, keeping Damen informed of the vessel types and characteristics that the Brazilian market is seeking at any given time, and using its regional network to spread the word in Brazil and beyond regarding the innovative and cost-effective solutions that Damen has to offer local shipyards and owners.
Twists and turns
Local knowledge is always invaluable in the maritime sector, and especially in the offshore services sector of Brazil that has been subject to volatility over the years as oil & gas prices have ebbed and flowed.
In the period up to 2008, the industry flourished driven first by the ‘post-salt’ Campos basin developments from 1970 up to around 2000 and then by the ‘pre-salt’ ultra-deep water discoveries in the Santos basin starting in 2006. Demand for offshore services at good prices was supported by the rising demand for oil over this period and this in turn led to new entrants both local and international ordering the latest offshore support vessels to meet the needs mainly of the national oil company, Petrobras.
The collapse in oil prices from their peak of over $160 p/b to a low of sub $40 sent shockwaves through the Brazilian market as it did through all the high-cost offshore sectors. Demand for services and related tonnage fell sharply, with the international service providers seeing the biggest reductions in their fleets resulting in a relative, though not absolute, increase of local tonnage participation. The effects of the onset of the global recession were further compounded in Brazil by the Lava Jato (Car Wash) investigation into high level government corruption, which began in 2014. Its impact on the financial position of Petrobras forced it to cut investment and sell off some assets, delaying the start of new developments and so delivering a further fall in demand for offshore services.
An important turnaround began in 2016 when a change in the pre-salt exploration rules allowed foreign companies to operate in such areas, increasing the interest of oil majors to explore and develop in the pre-salt cluster. BP for one is starting to implement its new strategy in the region, focusing on developing new blocks in pre-salt areas while selling off existing assets in post-salt locations to other international oil companies and national oil companies.
Opportunities in 2019
Clei Alves with Brazilship/Scanbrasil has worked with Damen’s offshore department since 2010 and closely followed the events and their effects on market trends. He looks ahead to the challenges and opportunities that the future might hold. For example, he says that there remain some challenges in the market.
“There is still a significant number of OSVs idle right now, he says, “and until these are put to work, retired or employed elsewhere it’s difficult to talk of a market in balance. However, we are starting to see some positive developments on the horizon with the market beginning to recover from the crisis. Petrobras is leading the way, actively tendering for all kinds of offshore units from supply vessels to construction and drilling units, plus new production assets and the engineering projects that accompany them.
“In addition, we see the market diversifying through the concession and production sharing rounds of the National Agency of Petroleum, Natural Gas and Biofuels (ANP) which is responsible for the regulation, contracting, and oversight of commercial activities in the oil industry. The Petrobras divestment programme is also playing a leading role in opening up the Brazilian offshore market to international operators with a view to encouraging competition and reducing prices. This has the added advantage of allowing companies to begin operations almost immediately as the exploratory licenses are already in place.
Currently, says Clei, there are seven oil companies operating on the Brazilian continental shelf in addition to Petrobras. We expect to see this number grow in the near future as the divestment programme and ANP bidding rounds continue.
“The pre-salt productivity reflects major investment during the latest ANP bidding rounds and new investments are foreseen for the upcoming concession and production sharing rounds, including the transfer of rights surplus and the permanent offer of returned oil fields and exploratory blocks not awarded in previous bidding rounds or returned. The extensive infrastructure already established and the maturing of the regulatory framework with a continued positive government agenda supporting the sector will also be very positive for confidence among all those involved in the sector, and will encourage long-term planning and investment.
“It’s quite clear that the new and continuous bidding rounds from ANP are having a positive effect on building up the fundamental viability of the industry. We lost this cornerstone when we went from 2008 to 2013 with no awarded acreage. The vacuum contributed to making the impact of the financial crisis on the offshore sector even greater than it need have been. The plans for yearly auctions that have been announced will make the offshore market more predictable from now on.”
And Clei has other reasons for feeling positive. “2019 started with 34 drilling license requests issued to Ibama (the Brazilian Ministry of the Environment’s administrative arm), mainly in the Campos and Santos basins. According to ANP, so far around 30 offshore wells have been drilled and this should reach 60 by the year-end. ANP predicts that this figure will almost double over the course of 2020. We expect production to increase steadily up to 2025 with three FPSOs coming online each year. These, along with decommissioning projects, will drive demand for OSVs, vessels to support subsea projects and drilling units in the coming years.”
Campos and Santos Basins
“Working with Brazilship/Scanbrasil, Damen should be in a good position to identify promising opportunities involving both the international oil companies and a resurgent Petrobras and design and build for them the vessels that meet their exact needs in an efficient, economic and environmentally friendly way.”