Petrobras is developing Brazilrsquos extensive offshore oil and gas reserves including the subsalt oil fields that have long been considered inaccessible

GE in $1B+ Supply Contract with Petrobras

Sept. 18, 2012
GE emphasizing Brazil for investment, expansion Pact extends involvement between two companies GE commits to local production

GE Oil & Gas will deliver almost $1.1 billion in drilling equipment as part of a new supply contract with Petróleo Brasileiro S.A., or Petrobras, the Brazilian energy giant that is the primary developer of that country’s offshore oilfields. It’s described as the world’s largest contract for subsea wellhead equipment, and includes an estimated 380 subsea wellhead systems as well as installation tools used in oil-well exploration.

Petrobras will install the GE subsea wellhead systems in various oil and gas fields in Brazil, including the ‘ultra deep’ sub-salt oilfields that contain some of the worlds’ most extensive reserves.

The new contract follows a 2009 pact between GE Oil & Gas and Petrobras, which at $250 million was described at that time as the largest-ever contract for wellheads,.

More than 75% of the parts to be supplied through the new contract will be made in Brazil, GE indicated. In particular, GE’s plant at Jandira, near São Paulo, will manufacture the equipment. The conglomerate noted it recently invested $30 million there to expand production capacity.

“The Jandira facility has been crucial in allowing GE Oil & Gas to provide world-class technology and has prioritized Brazilian-based production, which is a critical component in local social and economic growth,” according to Fernando Martins, president of Subsea Systems for GE in Latin America. More than 1,200 GE wellhead systems and 180 subsea Christmas trees have been produced and installed in Brazil in the past 30 years.

“This new agreement between two of the world's largest companies shows our commitment to collaborate in the development of the oil and gas sector in Brazil,” stated president and CEO João Geraldo Ferreira, of GE Oil & Gas for Latin America. “In recent years our investments and efforts have been focused on preparing our company to support market growth and to be ready for contracts of this size, developing the entire supply chain. We want to grow with the country.”

Earlier this year GE invested $300 million to take an 0.8% preferred-equity stake in the Centennial Asset Brazilian Equity Fund LLC and other ventures led by Brazil’s EBX Group. It was explained as a “strategic investment agreement” in a portfolio the EBX created to hold several mining, logistics and oil-and-gas companies. Its primary focus is Brazilian industrial development projects — in particular oil-and-gas projects.

In terms of investments to supply oil drilling and exploration equipment and components, GE is investing $200 million at its plant Niterói, Brazil, near Rio de Janeiro, to expand its flexible line plant. That material is used to extract oil from Brazil’s new sub-salt fields.

In June of this year, GE completed a $32-million plant expansion at Macaé, also near Rio de Janeiro, tripling the size of that operation.

“The new contract builds on our existing relationship with Petrobras and follows previous successful projects,” according to GE Oil & Gas Subsea Systems vice president Rod Christie.

“Through the acquisition of VetcoGray in 2007 and Wellstream in 2011 and ongoing investments in technology, GE has become an established player in the offshore industry,” Christie said. “With more than 5,000 subsea employees operating in more than 50 countries we are supporting some of the industry’s largest and most challenging projects.”

About the Author

Robert Brooks | Content Director

Robert Brooks has been a business-to-business reporter, writer, editor, and columnist for more than 20 years, specializing in the primary metal and basic manufacturing industries. His work has covered a wide range of topics, including process technology, resource development, material selection, product design, workforce development, and industrial market strategies, among others. Currently, he specializes in subjects related to metal component and product design, development, and manufacturing — including castings, forgings, machined parts, and fabrications.

Brooks is a graduate of Kenyon College (B.A. English, Political Science) and Emory University (M.A. English.)