UTC made the decision more than 10 years ago to focus its efforts on winning construction contracts for energy projects. The move is paying off, as the country is making an unprecedented investment in building up its energy infrastructure, reports Jeffrey Matthews.
Brazil’s government has been pushing for Latin America’s biggest economy to increase its energy independence for decades, and the announcement in 2007 of the discovery of an immense offshore oil deposit promised to help the country achieve that goal. Since the announcement about the Tupi oil deposit, 290 kilometers (180 miles) off the Brazilian coast, the state-controlled oil company Petrobras has been gearing up to start production there.
The field contains an estimated five to eight billion barrels of oil, making it the biggest discovery in the Americas in more than 20 years. The investment to exploit the deposit, located beneath 3,000 meters (9,800 feet) of water and another 5,000 meters beneath the seabed, will be immense, and UTC Engenharia S.A. is one of many Brazilian companies that stands to take part in the effort.
“The energy sector is one of our principal focuses,” said Dr. Ricardo Ribeiro Pessoa, chief executive officer of the engineering and construction company. “We’re concentrating on industrial construction, and energy, oil, hydroelectric and other areas are growing very strongly.”
The builder develops a strategic plan every five years, and opted more than 10 years ago to target the energy setor. It was a wise choice, as the country’s booming economy has spurred demand for electricity, and the government has encouraged increasing investment in renewable energies from thermoelectric sources, as well as hydroelectrics, among other areas.
Brazil’s offshore oil industry is hugely important to the economy and to UTC, and will become even more vital as development of Tupi and other fields start. The International Energy Agency projects that the country’s oil production will more than double from about two million barrels per day in 2006 to about five million barrels per day in 2020.
The Campos basin currently accounts for more than 90 percent of Brazil’s offshore production, and fields there are still being developed and generating contracts for UTC and other companies. The Santos basin, where Tupi is located, will require a total of about $400 billion in investment to extract the 30 billion barrels of oil that might lie beneath the waves in the area; the builders and suppliers of the oil platforms will participate in the endeavor.
Petrobras has budgeted $174 billion in capital spending for 2009 through 2013, including the Santos basin, an increase of more than 50 percent over its previous investment plan. The town of Macaé, in the north of Rio de Janeiro state, is the most important operational base for Brazil’s offshore oil industry, with more than 3,500 companies in the area working in the industry.
UTC has two facilities in Brazil where it carries out most of its offshore activities, one in Macaé and one in Niterói, also in Rio de Janeiro state. The Macaé facility, near the Campos basin, occupies 21,000 square meters (226,000 square feet) and is equipped to service the oil platforms and build various types of components for them. The Niterói facility is bigger, at 112,000 square meters, and was originally built to be an engineering and support base for the first oil platforms in the Campos basin. Today, it builds large modules and platform components.
UTC’s activities in the energy sector are extremely wide-ranging. At the moment the company is working on many projects for Petrobras, including building different parts of several offshore oil platforms, putting up power plants and refineries and maintaining them, and an oil pipeline project.
UTC’s biggest current work entails the construction of major parts of Petrobras’ P-55 offshore platform, which will have the capacity to produce 180,000 barrels of crude oil per day when it’s completed in 2011 or 2012. The semi-submersible platform will extract oil from the deep-water Roncador field in the Campos basin.
The company is building a topside deck box, which is a structure that provides weather protection for other components on the platform. UTC is also providing a booster compressor and gas dehydration and CO2 removal module as well as other modules, all being built at the Niterói facility.
While Petrobras is UTC’s biggest client, the builder has many other big international and Brazilian customers. UTC is working on two blast furnaces for Thyssen Krupp for a steel plant in Itaguaí, Rio de Janeiro, and has carried out projects for DEMAG/SIEMENS, Dow Chemical, Dupont, Halliburton and a host of other foreign companies.
The list of Brazilian companies that are or have been UTC clients is, understandably, even longer. In addition to Petrobras, UTC has worked on several blast furnace improvement projects for steel maker Gerdau Açominas. In the past the builder has worked with mining company Cia. Vale do Rio Doce, most of Brazil’s electric utilities and many of its biggest chemical makers.
MORE THAN A BUILDER
UTC also has many maintenance and renovation contracts with its clients, and carries out other tasks too. Petrobras is once again a major UTC client for these services, with the builder carrying out maintenance work on several of the oil company’s offshore platforms and onshore installations. UTC is ready to take on all aspects of the contracts it wins, starting from design and engineering.
“We work mostly in engineering, procurement and construction,” said Pessoa. “We start with the design details, to prepare for the construction. We work as closely as necessary with our clients, to make sure they get exactly what they need because we’re in a very competitive market.”
UTC is usually working on 20 to 25 contracts at a time, all in various stages of progress. The pace of new work slowed a bit in 2009, with revenue for the year likely to be about 25 percent less than originally expected. The company already sees improvement, as investment picks up, and the market should return to the pre-crisis situation during 2010, Pessoa forecasts.
“The price of oil is back up, and the prices of commodities are rising again too,” he explained. “We can already see investment recovering in the steel industry, and mining is also picking up with the rising demand for bauxite and iron.”
UTC is keen to continue operating in these other sectors to ensure the builder has diverse sources of revenue. The company’s management is always looking to expand into new niches, and in the past has taken on contracts for clients in the food sector, in metallurgy and in several other areas.
Nevertheless, the decision more than 10 years ago to shift its focus to Brazil’s energy sector has proven to be the right one. Capital spending on offshore oil platforms and renewable energy sources is going to soar in coming years, providing companies such as UTC, with a strong track record of doing good work, with a growing source of revenue for years to come.