Venancio Dias, Country Manager, Mokveld Valves Brazil
The country manager of Mokveld Valves in Brazil talks about the importance of considering total lifecycle costs, and what it takes to be a successful manager of a multinational service provider in the Brazilian market.
The company has been operating for almost 15 years through representatives before. In 2011 it decided to establish a direct presence. Why did Mokveld choose this moment to centralize its Brazilian activities?
Mokveld had been working in Brazil for 15 years through agents before it considered a direct presence in 2010. This change in strategy was triggered by the huge CAPEX program of Petrobras, the largest in the history of the oil and gas industry. In 2011 the decision was made to have our own presence in Brazil. In 2012 I joined Mokveld team as country manager to set up the legal entity of Mokveld Valves in Brazil.
Today, Brazil is Mokveld’s most important branch in Latin America. Our plan is to establish a complete infrastructure to support the installed base and the new post- and pre-salt contracts within a relatively short time.
Many European companies have unsuccessfully tried their luck in Brazil, and we even have people speak of enthusiasm fatigue. How do you make this market work?
Generally the headlines coming from Brazil have been very positive over the past years, but European companies like to wait and see results before making investments. When we started to develop Mokveld in Brazil, we had to prove that the stories and marketing about Petrobras’ investments could form a strong business case.
The company interested to invest in Brazil would start to look for skilled people: firstly a manager able to drive the first developments in Brazil with in-depth knowledge of Petrobras, oil and gas company procedures, solid EPC and shipyard networks, and an ability to navigate relevant entities such as IBP and ANP. It is not easy to deal with the Brazilian business environment, and having the right local skills is a must.
We were able to confirm the bright prospects of the Brazil market and managed to receive some very important contracts for platforms and refineries, which made the company more confident to make solid investments in Brazil.
Could you tell us a bit more about your own background then and what made you enthusiastic to get on board with Mokveld?
I have sixteen years of experience selling to Petrobras and I know what the company is looking for to support their growth plan. When I started talks with Mokveld, I quickly realized that the company has an exclusive product design of highly engineered valve technology and design that fit the needs of Petrobras. Axial valves for control systems, choke valves for severe service, non-slam check valves, HIPPS ( High Integrity Pressure Protection Systems ) and control valves for subsea processing plants .
Petrobras will allocate around USD 5.6 billion for an oil and gas efficiency upgrades in the E&P operations. PROEF is a strategic plan for Petrobras where the company is aiming to increase operational efficiency. Mokveld can contribute with reliable equipment, properly dimensioned for the actual and future operational conditions. The initiative will spur mature operational units like the Campos Basin Operational Unit (UO-BC) and the Rio Operational Unit (UO-Rio). These are crucial Petrobras projects where Mokveld can position itself as a reliable supplier to support production growth. The Petrobras investments plan also consider several new FPSOs and this is an important target for Mokveld Valves as well.
When I visited Mokveld’s high-tech plant in the Netherlands, I understood that connecting Mokveld to Petrobras in this dynamic environment could benefit all parties involved. We are developing the company in Brazil based in that.
How is the Mokveld brand recognized in the market?
Mokveld is the leading supplier of engineered valve systems for critical control , severe services and safety applications. We are recognized for our process engineering knowledge and the equipments reliability and unique technical features of our products.
Having said that, we see a crucial competitive edge for our products also in subsea application. Subsea developments are a major challenge not only for the manufacturers but also for Petrobras.
Also, refineries and offshore topsides facilities struggle with low quality and incorrectly sized equipment, which creates relatively low efficiency. Petrobras is pushing for higher quality from the suppliers, which is a great opportunity for Mokveld, because we already adhere to the highest standards in the worldwide O&G industry.
Mr. Assayag of Cenpes explained that yes, technological challenges need to be overcome and the highest quality is needed to produce the pre-salt, but cost optimization is the golden word today.
High quality means a higher price. But when we talk about cost, we must pay attention not only to the acquisition cost, but also to the total life-cycle cost and more important the cost related to shut-down of a plant due to failure of equipment. If we make the total analysis of the cost of ownership as Petrobras is doing nowadays, the conclusion seems to be that more expensive equipment (CAPEX) can actually safe a lot of money (OPEX) and lead to increased plant efficiency and O&G production, also reducing production downtime .
We try to find the optimum balance between the Petrobras requirements (reliability and safety) and the focus of the EPC contractor (cheapest acceptable product). The manufacturers are in the middle trying to serve both; as well as ANP with local content. It is a difficult equation but we emphasize on the wishes of the end user. Petrobras is the pivot of the game; they decide and contract the EPC companies which moves many suppliers . Equipment providers have to serve Petrobras’ targets, so, supply reliable products for their platforms, refineries, and subsea installations is an obligation .
Would you say keeping this balance is the main challenge for you going forward?
Balancing in a competitive scenario between the EPC players for the bids and high-quality products required by Petrobras is an essential challenge.
The business environment is very competitive with many consortiums involved on each Petrobras project. In addition, the bureaucracy complexity represents another major challenge. Just look at the incredibly complex tax regulation on the three levels of government ( municipal, state and federal ) and the labor legislation, them creates a scenario where the risk of liabilities is very high and can damage the company reputation. It is very complex to work in Brazil, and sometimes European and American companies are afraid to put their hands into this scenario.
Good manpower is essential to grow a business in this dynamic and complex market but this is yet another challenge in Brazil. You will find an excellent engineers or technicians, who is not familiar with a commercial environment; or you will find a candidate with an excellent commercial drive but a lack of knowledge of technological matters or a great administrator which has no background with Petrobras or oil & gas market. Brazil is not a market for beginners. Human Resources are a real challenge in Brazil for several segment markets. From a business management perspective, it is very difficult to find some executive leader skilled to deal with Petrobras and Brazilian O&G market scenario.
Salaries in Brazil are higher than in Northern Europe, which is a surprise for many companies. But we are working with a completely different business scenario. If a company does not invest in skilled people in Brazil it cannot grow and , as the Brazilian market has a very high potential, this is a vital issue. Cost of local presence and production are high and we foresee a difficult export situation when the demands of the local market have been satisfied.
For many service companies there is only one real contractor and one client, which is of course Petrobras. Still, the share of IOCs and mid-size and junior players in Brazil’s production output is set to rise. How important is this non-Petrobras market for Mokveld?
Given the size of their investment plan, Petrobras is our main target. But we are not closing eyes for other important customers. Mokveld supplies to all players in the oil & gas business: SBM, Aker Solutions, Statoil; the key players in subsea and topside engineering and oil & gas operators.
Our subsea control valve was actually developed in close cooperation with Statoil. One of the technology gaps to be addressed was the development of large fast-acting subsea control valves. Several operators recognized the unique advantages of Mokveld’s axial flow design in topside severe service control applications and approached Mokveld to investigate the axial flow concept as the basis for a subsea control valve.
In March 2012, we were awarded the contract for subsea anti-surge control valves for the Åsgard Subsea Gas Compression Project. This valve fits the Brazilian market perfectly and it is a great solution for the subsea installations. In Brazil, we supplied all choke valves for the Petrobras replicants FPSOs and we have an installed base which are operating in Brazil with chartered FPSOs as well. Serve Petrobras , IOC and Oil and gas companies present in Brazil are equally important for our plans.
What are your expectations for developing Mokveld’s position in Brazil through 2020?
Since we began working for Mokveld in 2012, the total value of the contracts we received has been substantially higher than in the years before.
If we continue developing at our current pace, I can see Mokveld manufacturing here by 2020. If everything goes as planned, Brazil’s oil & gas production will be almost 100% higher than it is today and require more products and service support.
It is our intention to maintain the same high-quality production standards in Brazil that we adhere to in the Netherlands, considering that ANP will push for more and more local content, our intention is to increase our footprint in Brazil.
As a Brazilian, I am very happy and proud to see global companies interested in Brazil. Of course we still have many social problems to solve. We pay a lot of tax, while public services, logistic, telecommunication, infraestructure and the level of education leave room for improvement. The protests of the past months make clear that change is needed. Nonetheless, the political environment is stable and a functioning democracy with very friendly people is in place. It is safe to make investments in Brazil, mainly comparing with some other Latin American countries.
The opportunities for growth are huge, and not just in oil & gas. Look at the infrastructural needs of this country. The opportunities lie also beyond Rio de Janeiro and Sao Paulo. I dare say that the North East and the Central regions offer even bigger opportunities.
To read more articles and interviews on Brazil, and to download EnergyBoardroom’s latest free report on the country, click here.