OFFSHORE | Brazil could be ‘demise’ of desperate

One US player has warned that Brazil is not the panacea some think it is.  

Darrin Griggs
TRADEWINDS.NO 

Offshore Brazil has been a beacon growing ever brighter as the world’s markets dimmed but some say new shipowning entrants drawn to the nation’s difficult sector may end up as moths in the flame. Massive deepwater discoveries beneath salt domes off Brazil, ever-increasing budgets at state oil company Petrobras and huge newbuilding plans for ships and rigs have featured large in discussions of the nation’s prospects. In delivering positive sentiments on the offshore sector, owners, brokers and analysts have used the names of “Brazil” and “Petrobras” with increasing frequency since the sharp turn of the markets in 2008. However, Hornbeck Offshore Services (HOS) founder and chief executive Todd M Hornbeck says companies fleeing poor markets to seek shelter in Brazil may wake up to a harsh reality. HOS, which has 51 supply vessels and four multipurpose support vessels (MPSVs), has been in and out of Brazil mainly on a well-to-well basis for decades, says Hornbeck. The company now has long charters for eight offshore vessels with Petrobras. Two are currently working in Brazil and another six are now being modified at shipyards in the US to join them on contracts that were negotiated in 2008. All eight will be at work by June. “While it is a very dynamic place from a business standpoint, it’s got some big challenges and, in the lure to Brazil, a lot of people will go down there and not be as profitable as they thought. It’s a place where you can’t make very many mistakes,” said Hornbeck. “Petrobras is just a smart company, a complex company. Not just Brazil but Petrobras, the company, represents 50% of the world’s deepwater exploration. It is a big, big entity. So Brazil is a very challenging place from an operational standpoint, with very large oilfields and a client that understands your business just as well as you do.” Apart from dealing with a savvy, demanding and bureaucratic client, working in Brazil is complicated in terms of corporate taxing strategy and for local manning requirements because the market is booming with too few crew to go around, says Hornbeck. As the requirement for the proportion of local crew rises after new ships enter the area, the HOS ships will eventually end up with only the company’s original masters and engineers.Some say being too competitive on the pricing of charters to Petrobras can be risky for the owner. Other US owners, such as Laborde Marine, which is building vessels in Brazil, have mentioned crewing as a problem but also talked of unexpected costs that have mounted to chip away at the planned profit margins to render projects unfeasible. US owner Harvey Gulf International says it offered a vessel into a recent Petrobras tender and failed but adds that it intentionally priced the contract high as it saw no reason to take a chance. The downturn in the offshore sector after the start of the global economic turmoil, especially visible in mature regions such as the North Sea and the US Gulf of Mexico, has created a new focus on Brazil for many in the offshore sector. “Particularly now, with this market, because Brazil is such a large draw of equipment and need, I think a lot of people are running down there thinking it is a panacea and it’s going to save them. Actually, I think probably the inverse will happen – it will be their demise,” said Hornbeck. HOS offered in ships on a recent tender round and was unsuccessful but says it feels no pressure to rush into Brazil for more charter coverage. “We bid into Brazil for years and didn’t win contracts. And it is important to remember that the contracts we have there now were actually negotiated in 2008, so we are not running to Brazil because we are afraid to stack equipment in the Gulf of Mexico,” said Hornbeck. “On the recent tender, we put the pricing where it made sense for us and our shareholders on a return basis and the market is just below that. We are not sorry we missed it because we can wait and when the market returns there will be opportunities.”

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2 Comments

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2 responses to “OFFSHORE | Brazil could be ‘demise’ of desperate

  1. Pingback: Temporary Test Blog » Blog Archive » OFFSHORE | Brazil could be 'demise' of desperate « Safe Seas

  2. Abu Galib

    MBBS doctor from India seeking offshore and marine vacancies worldwide. How do I contact recruiting companies for positions in Brazil etc?

    Regards.
    Dr A Galib

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