Brazil shipyard says local-made rigs more costly

Brazil’s leading shipyard Sete Brasil said government expectations about national content requirements for building the rigs, platforms and ships needed to develop its massive offshore oil reserves were unrealistic.

Company Chief Executive Joao Carlos Ferraz said requirements that 60 percent of the rigs his company is building for state oil company Petrobras be produced locally were out of line with international industry norms.

He said drilling rigs built in Brazil were 15 percent more expensive than in rival shipbuilder South Korea. The statements underscored Brazil’s challenge of educating and training its workforce to meet the needs of its booming economy.

An extremely tight labor market is becoming a threat to the central bank’s effort to rein in inflation, which has surpassed its upper target range of 6.5 percent annually.

The government of former President Luiz Inacio Lula da Silva launched the program to revive the country’s moribund shipbuilding industry. Petrobras, which holds a 10 percent stake in Sete Brasil, created the company with a group of banks and pension funds.

During a forum on national content in Rio de Janeiro, Sete Brasil’s Ferraz asked the government to reduce the requirements for companies operating in the shipbuilding industry from the current 60 percent national content to a level somewhere closer to the 40 percent requirements used by South Korea.

“South Korea has an absurdly long back-order list, and it can’t even meet 40 percent national content,” Ferraz said. “By current requirements, that go component by component throughout the whole production process, it is more difficult and costly to build drilling rigs in Brazil.”

Sete Brasil won the first Petrobras tender to build seven rigs as part of a larger package to construct 28 of the massive vessels that drill kilometers below the ocean floor to sniff out oil and natural gas deposits.

PETROBRAS STRIKES BACK

Petrobras Chief Executive Jose Sergio Gabrielli responded that if Sete Brasil “did not submit a good price for the next rigs, it will lose,” avoiding that question of whether rigs build in South Korea were more competitive.

Petrobras has already canceled more than one tender for new rigs and ships to be built in Brazil in recent months because it considered all of the local shipyards’ bids too high.

Gabrielli said the local industry was adequately responding to the demand created by Petrobras for new vessels and services to develop the subsalt oil reserves.

The company expects to commission the building of 568 support ships for its offshore operations by 2015. It also plans to have 94 production platforms and 65 drilling rigs built, as well over the same period.

“The P-57 production rig came out two months ahead of schedule. Conditions are improving,” Gabrielli said.

Source: Reuters

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