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Interview

Ronaldo M. De Oliveira, Commercial Director, CBO Brazil

03.04.2014 / Energyboardroom

Ronaldo Lima, Director of CBO talks about the company’s acquisition by the Fischer Group and the future for this exciting company. He describes the fundamentals of success the company has been built on over the years, its personnel, and how the company’s shipyard has delivered high quality locally produced ships, supplying Brazil‘s offshore infrastructure.

 

CBO is in a period of transition. Can you update us as to the prelude to this phase of new ownership of the company?

CBO is a 100 percent Brazilian offshore company, founded in 1978. Since then, CBO has grown its fleet, with a particularly intense period of ship building beginning in 1999 that aimed to replace our older vessels, thereby rejuvenating our fleet. CBO has sold all its older vessels and the construction program will have created 21 vessels in total, the last of which will be delivered in April 2014.

The average age of the fleet is five to six years old, and the vessels work primarily with Petrobras who hold about 80 percent of CBO’s contracts. The other contracts are with Statoil.

Previously, you expressed a wish to bolster CBOs ‘self-sufficiency’ in shipbuilding and aim for higher value products, and higher technological solutions. At that time, there was also some interest in acquiring CBO. Was the pursuit of these characteristics the reason CBO was attractive for acquisition?

First, the fleet is very new—around five years old on average. CBO is also proud to state that the company was elected by Petrobras as the premier company in terms of Health, Safety, Environmental and Quality (HSEQ).  Day by day, CBO’s operations are very well handled, a fact that was sure to have been analyzed by potential buyers before any purchase offer was made. CBO was a perfect private equity company to seek the acquisition of before it was bought out.

What is the current status of your operations?

All our vessels are currently under contract, and these obligations are being fulfilled. The Arpoador, launched in the latter half of 2013, for example, is already under contract with Petrobras. CBO had participated in a bidding round three years ago, winning four contracts. CBO’s new owners are, I am sure, very pleased that all our vessels are currently working and with good performance.

CBO’s fleet is very new. What are the tangible features of your ships and facilities that best represent the innovative face of your company?

Of course, we work closely together with the ship designers and have previously used the Ulstein x-bow design to produce our ships. We moved to utilizing Ulstein concepts as we had a positive experience with their designers. Furthermore, CBO has a significant emphasis on improving the technical capabilities of its staff, promoting training of its crew, which allows them to operate more varied equipment including diesel electric vessels. A working arrangement with WEG allows CBO to develop these diesel electric vessels, which CBO considers to be an important development.

CBO’s ships, ship designs and shipyards seem to have an excellent reputation. How does the wider Brazilian shipbuilding industry stand on an international level, however?

It is not easy. The first comparison ship owners assess is price, yet quality for shipyards is vital to improve one’s reputation and brand. In China, potential buyers have been frightened away by the perceived inadequacies with regard to the level of quality in Chinese shipyards. However, the Chinese have been gaining skills and are rapidly improving their finalized product. They have a big advantage with regard to the price of labor, particularly with regard to Brazil, where the price of labor is exceptionally high. The cost in China for this reason can be a third less.

In Brazil, and particularly at CBO we do produce high quality ships—further efforts to reduce costs, however, will have to be made. Local content requirements are another challenger. The new law from the ANP requires over 50 percent of local content to be included in ships that are built in Brazil, which restricts use of Chinese built vessels for example.

With the abundant offshore resources, can you tell us what you consider to be the immediate future of the offshore services sector?

Information is key, particularly with regard to the intentions of Petrobras. Petrobras intended to build an extensive number of drill ships, which will require a large number of support vessels. I am still of the understanding that 650 vessels will be required to service the pre-salt resources, but this number is seemingly being attained more slowly than expected. This requires the addition of another 200 vessels to the current Brazilian fleet. Local content requirements mean that many vessels must be built here in Brazil, but this capacity is not as yet being filled, particularly when one considers that some vessels will need to be scrapped in this time.

You mentioned that the labor cost in Brazil was particularly acute; can you give some further details as to your understanding of this situation?

The availability of labor has improved somewhat, but the quality of labor has remained lacking. CBO seeks to address this by using a training center with simulators. CBO has a comprehensive training facility and workshop near our shipyard, where CBO takes cadets after graduation from the Navy schools and give them further training before they take a position in the ship!

Oceana, who recently acquired CBO, operates a similar business model to CBO. What are the synergies between the companies?

Oceana is building a shipyard in Santa Catarina. The intention is to build the vessels at Oceana’s larger shipyard, once completed, and maintain them at CBO’s existing site.  At the moment, CBO is already cutting plates here for Oceana’s facility. In that sense, these two shipyards will complement each other greatly, as there is a lack of drydocks for repair of vessels at the moment. With a larger fleet, it makes sense to have a drydock available for maintenance operations.

The companies will merge completely. As Oceana does not yet have a full team for their company, the experienced staff at CBO will help Oceana develop their end of the company. CBO is an established ship owner and its reputation and capabilities will be of great use to Oceana in making sure the CBO brand, which will likely encompass both businesses, continues to stay strong.

Where do you see the wider OSV market in five years’ time?

The new owners of CBO are clearly seeking to increase the number of vessels in the fleet and increase the depth and breadth of operations. Next year are the elections in Brazil, and the political ramifications of this event will be massive. Petrobras is, at the moment, restricted by the Federal Government action in the gasoline price—a fact that reduces its capacity to invest elsewhere. Petrobras is essential to the future of Brazilian prospects for developing its offshore resources, and is also essential for the Oil & Gas industry.

 

To read more interviews and articles on Brazil, and to download the latest free report on the country, click here.

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