Ian Wilkinson, Socio-Director, Petrolink, Brazil
Ian Wilkinson, Socio-Director of Petrolink Brazil gives an insight into the competitiveness of the Brazilian Oil and Gas sector, what differentiates Petrolink from its competitors, and that it is crucial for the company to continue to remain ahead of emerging trends.
Brazil is touted by many as the next frontier in offshore oil and gas markets, despite some signs that things are not quite perfect—the absence of several major oil companies at the recent Libra auction for example. How competitive do you rate the local Brazilian market to be?
Speaking as the manager of a SME (Small – Medium Enterprise) here in Brazil, as well as someone who arrived in the 1990’s despite little support to invest personally in this market, I can say that Brazil is not an easy market for overseas companies to enter, regardless of their resources. There is a great deal to learn, from the legal set-up and the tax framework to the many unwritten conventions that are still very relevant to business in this market. Many individuals are caught out having arrived in Brazil because the country looks, and often feels like a European state—there is not the same cultural distance that one might perceive between Europe and Asia. The differences here are subtler than those one might encounter in Asia for example, but understanding the divergence between Brazil and Europe is essential to succeed. The catchall phrase of ‘cultural differences’ is key to business strategy and prominent amongst all the issues, which must be considered by any business seeking to enter the Brazilian market.
Does technical expertise from more established offshore basins, like in Northern Europe for example, put companies at an advantage when it comes to entering specifically the oil and gas sector here in Brazil?
Obviously there is high demand for quality service delivery, such as that commonly found in the North Sea. Petrolink falls into this category, in bringing efficient solutions to Brazil, in our case providing secure data distribution and real-time monitoring of drilling operations. Most companies in the North Sea have evolved these efficiencies because the margins have historically been squeezed in that arena. These companies have technical operating and commercial solutions that are very applicable to the Brazilian market, and in that respect, these firms do offer significant opportunities to the Brazilian oil and gas sector. The issue remains regarding making such solutions work within the Brazilian framework. Technicians and engineers in Brazil frequently tend to be reticent about adopting new technologies and resistant to change, although as the mean age of such staff in Brazil falls, change is happening more rapidly and standards are moving more into alignment with global trends than with local ones. Another factor driving technological progress is the commercial imperative: the deepwater opportunity is there. For this reason change is coming to the Brazilian market and it is getting easier for foreign companies to succeed.
Do you have any key projects or products currently under development to support the market?
Data management systems are critical and Petrolink is particularly strong in delivering secure data distribution via an easy to use platform.
In Brazil, currently Petrolink is migrating our services to a new software platform, PetroVault, which will allow full integration of real time data into our more traditional products: reports and the like which we refer to as ‘static’ information.
Petrolink here in Brazil is very much still focused on secure distribution of static information because, firstly, data sensitivity is given a higher priority here than is typical in other countries. It is, of course, quite right to be cautious about protection of data and Petrolink has been present to offer solutions in Brazil on that basis, allowing the operators to maintain the integrity of their data.
The current trend, globally, is for operators to commence sharing real time data with partners. Petrolink has developed two core competencies over their twenty year history, the first being our market-leading secure data distribution system over the web, and the second being a robust real time data solution, based on WITSML (Wellsite Information Transfer Standard Markup Language). The current trend of collaboration between operators and partners has created demand for both these services. Right now is Petrolink’s time—the company has the reputation for providing high quality secure communications and is also now providing some of the most advanced live data display systems. Bringing these systems to the Brazilian market is principally about customization to local preferences, something Petrolink can achieve readily.
Customization to our client’s needs is highly important to our clients in Brazil. The user interface, the ease of use of data is essential alongside the complexity and range of the data applications, which must retain value for the client. Petrolink is very able when it comes to simplifying systems. In the Brazilian market, unnecessarily radical changes to format are usually unwelcome and so the evolution of products involving wide user-input is important to gain acceptance for any new system.
What prospects exist for software companies to grow by acquisition and merger here in Brazil?
Specifically referring to Petrolink, we do not currently have any plans to acquire any companies, as all our growth for the moment will be self-funded and organic. Speaking as a ‘Global Scot’ however, and looking at the market in a broader perspective, there has been a strong trend in the last three or four years for foreign companies to either create local joint ventures, or acquire local businesses. This is part of the globalization of the integrated operating systems market, and simply represents a natural period of consolidation.
Setting up a subsidiary is a complicated and time-consuming means of reaching the market here in Brazil. Previously, in the early 2000s this was not such an issue, as costs were far lower in Brazil. However, costs have spiraled over time and this makes this option less attractive: time to market has lengthened and this is now as important for bigger players as cost to market because of all the problems associated with, for example, the time required to perform due diligence in Brazil and overcoming lack of transparency common in this country. For this reason, acquisition is an increasingly attractive option. As most international solution providers have been here for some time the emerging trend now is for them to absorb other companies. On top of this, SMEs are now also starting to join the merger and acquisition game as well.
Against this backdrop of consolidation, with other players further establishing themselves, how will Petrolink be promoted as ‘the solutions provider’ in the future?
It is a very easy thing to promote Petrolink as the forerunner in this market. Petrolink’s product is a globally recognized brand, and is a market leader—the product has been a relatively consistent offering, albeit with adaptations over time—since the 1990’s. Focusing on quality of service is key, especially in Brazil where service quality often falls short of global expectations. When clients find a quality service provider, they tend to stick with them.
Petrolink is very conscious of the need for continuing development of its customer service strategy as well as the company’s product range. Whilst this market is constantly evolving, it is a restricted market, and very much dominated by Petrobras. Petrolink continues to seek good relationships across the market and an understanding of client requirements, ensuring that we are aware of customer’s changing expectations and can gauge how our product development should progress. The difficulty here in Brazil is to retain the key features of a product that the customer likes whilst at the same time changing the product enough to accommodate future requirements for our products and service. Petrolink must continue to remain ahead of emerging trends, ensuring that we can meet requirements for real time monitoring wherever it arises in the digital oilfield. The digital oilfield is a critical part of the viability of the large-scale ultra-deep water projects that are emerging in Brazil.
How competitive is the Brazilian oil and gas market?
It depends on the sector. The degree of real spend in terms of operators in the E&P sector is phenomenal and plans for the future of the oil and gas sector in Brazil is far from rhetoric: tangible changes are already being delivered. Whilst many countries have declared ‘five year goals’, Brazil has the resources and motivation to deliver on its plans. The mobilization of huge investment to achieve these goals, whilst perhaps causing Petrobras some short-term headaches, has been a huge stimulant to the supply chain, an incentive which sees companies actively seek to provide for all the modifications required to existing systems, and which will in the future provoke new technological development addressing technical challenges posed by the pre-salt fields.
This knock-on effect through the supply chain is one of the reasons for the consolidation of service businesses mentioned earlier. There are still many technologies not yet present in Brazil; and the growth of the market tends to keep pace with the entrance of new solutions. For this reason, whilst competition is always there, it is restricted as the rate of growth of the market keeps pace with the availability of new technical skills provided by suppliers.
Where do you see Petrolink in five years’ time; how will Petrolink take advantage of the huge stimulus reaching the secondary supply chain at the moment?
The bottom line for Petrolink is to build from our current foundation by ensuring that real time data management solutions and visualization gain wider acceptance in the market. These services are essential tools in the modern oil and gas sector, assisting managers in making good decisions, and these systems can significantly reduce costs for drilling companies. Petrolink will be eager to expand beyond our historic core area of expertise supporting drilling operations to other contexts where our live data solutions can be of use- growing the solution into different sectors.
The E&P market offshore in Brazil is scaling up at an unprecedented rate, currently unmatched anywhere else in the world. The rates of growth are huge, and these problems are evident in the clear strain the industry is under as companies attempt to keep up with the transition from paper to reality. Despite the fact that last year, this year and probably part of next year have been tough for certain sections of the market, the end of next year should see the industry fall into a pattern of growth that should remain steady until 2020 at least.
From a Petrolink perspective, the company is expanding. Since February we have grown 55 percent in terms of volume of business. Petrolink’s technology, and the way the company delivers customer service, differentiates the company from our competitors and for this reason, I am confident Petrolink will continue growing along with the Brazilian market to 2020 and beyond.
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