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with John Oliver, Senior VP South America, M-I Swaco Brazil

24.05.2010 / Energyboardroom

M-I Swaco is divided into three georegions: North America, South America and the Eastern Hemisphere representing everywhere else. Just how important is this region to the company?

Obviously, all of the regions are important to the group because they all add up to what makes M-I Swaco as a global entity. In the last 12 months South America hasn’t been quite as impacted by the economic crisis as our other geographies. This means that we have been a nice counterbalance in the overall company portfolio. I would hazard to say that, if we have difficulties in the future, the other continents may well be on the upside of their business cycle and will be there to help us.

Within South America you can make the same assertion; in the last few years there have been some countries struggling while others have been rather buoyant. There are always parts of the business that are thriving and others worse off, but this is the nature of a multinational company. Brazil has certainly been one of those countries in growth mode.

How important has Brazil been in keeping South America in such good shape?

In the last 18 months, Brazil has been a critical factor for our success. However, it’s very competitive so while the top line growth is there it can be a struggle in terms of profitability. That being said, the activity levels here have been a significant help over a period when the rest of the industry was really struggling.

Turning towards operations, what is the scope that M-I Swaco offers in Brazil? Is it the full portfolio?

Yes. We now have all four of our segments represented locally. The Drilling Solutions segment handles the drilling fluids side of the business. The Environmental Solutions segment represents our solids control, cuttings handling, and waste treatment activities. Furthermore we have the Wellbore Productivity group which deals with reservoir drill in fluids, filtration, wellbore clean-up tools and breakers and everything that prepares the well for production. The last segment is the Production Technologies segment providing production chemicals.

A new addition for us is the Deeptec Brasil joint-venture, formed to provide expertise to Operators and the shipyards in rig, FPSO and supply vessel construction. This is a departure from our normal four segments, but it is important to help build the shipbuilding industry here in Brazil using both foreign expertise and local content. The plan is to hire Brazilian engineers and transfer our knowledge from overseas to build a unique Brazilian expertise in state of the art offshore construction that can then be exported to other deepwater markets around the world.

When we spoke with Jose Formigli, he noted that the offshore industry is rapidly increasing in order to handle the developments in deepwater. At the same time this attention is also bringing in a lot of competition in all aspects of the industry as many look to bring their excess capacity to Brazil. What makes M-I Swaco standout in Brazil?

We have operated in Brazil for over 40 years so we understand the environment very well. We’re also very intimate with our customers and we understand their needs here. Furthermore, M-I Swaco is a technology driven company so when whenever we see a challenge we rise to the occasion to provide the best solution.

I think our customers see us as providing good value for money and answers to their problems which are above and beyond the norm.

Petrobras is also a technology driven company; is this the key to working with the national champion?

Our relationship with Petrobras is a long-term one and they recognize that even when activity was low in Brazil we were present and continued to invest. Over the years they have grown to trust us and they know we can deliver. They also perceive us as being capable of producing the technology if called upon. In the end it’s an amalgam of all these factors that lead to our successful partnership.

To give an example of our dedication, in recent years we have invested approximately $100 million in infrastructure in the Brazilian market. In Brazil, logistical considerations are paramount and M-I Swaco has facilities in all of the key operational areas.

This is also of particular importance to the IOCs who may enter Brazil with effectively nothing on the ground. Our presence and depth in the market is recognized.

Where did the vision come from to retain such a footprint in the market through the down years when others went quiet?

All credit has to be given to our Brazilian staff who have believed in the market and maintained a relationship with Petrobras which represented much of the industry for many years.

Our employees also seized the opportunity to pursue the IOCs market when it first opened up. They believed in the future and made the necessary investments to serve this segment. A lot of people wanted to wait and see how the market would evolve but our people recognized the need and went for it! Today, I have many people in our operations that have been around since the early days. I believe that it is this continuity of personnel that drives our success. They have seen the growth and they know they can win, so the confidence is there to continue to innovate.

Why do you think the IOCs chose M-I Swaco in the beginning and more importantly, why do they stick with you?

Originally, I think our presence and knowledge of the market were important considerations for many IOCs. Some of the fundamental things to understand when entering Brazil are the logistical complexities, environmental permitting, and taxation issues. We were able to help these companies due to our experience.

Our experience also extended to technical issues. We had experience drilling in blocks adjacent to where many of these companies were looking to drill, so it represented a huge advantage in knowhow.

It was a good bet to go with M-I Swaco. Once they did, they enjoyed good service which quickly builds trust between partners.

Is there any project you would like to highlight for the group?

If I did that it wouldn’t be fair to all of our customers, with whom we have a very good relationship. Obviously, some have been more significant financially, but that doesn’t mean to say that the others are not important to us.

All of our jobs are challenging because the drilling environment itself in Brazil is challenging. This is why many of the operators choose to go with us: we understand the technological issues at hand. We are not flying in the dark.

You’ve partnered with OGX right from the beginning and they’re not an international company so they should know a bit more about the Brazilian landscape than most…

They knew us well because of our long history with Petrobras. I would have to guess that that is one reason why they chose M-I Swaco.

When we spoke with Alexandre Quadrado of Wood Group he noted that for technologically driven companies – such as yourself – one of the difficulties working with Petrobras is dealing with the balance between your offering that goes a step above and the price competition in the market. How do you surmount this challenge?

One has to consider the value of technology when putting a bid forward, so should not position oneself at a commodity price. There are ways to prove the value of your equipment to Petrobras, this is something that comes with experience in the market.

Having been in the market for so long, you’ve taken on a very Brazilian appearance. Why do you think the top talent and graduates of Brazil come to M-I Swaco?

We offer excellent training and career opportunities and we have a good reputation in the market place. I for one want to grow our Brazilian talent very aggressively, which is why this year I’m establishing a management training program across South America with a particular focus in Brazil. The purpose of this is to take our young people and train them to be effective managers.

I am taking some of my best people and moving them out to the Eastern Hemisphere and North America. They will have exposure in other markets to other technologies and business practices. This will let us bring them back in a few years as much stronger individuals who can better serve the market here in Brazil.

Of course, you cannot move everyone at the same time and for those that are here in South America we do our best to maintain the training levels. Above this, our experienced managers mentor them through the practical aspects of management.

With such thorough training in the market have you found your competitors coming around trying to steal your people?

All the time and it has always been the case.

M-I Swaco has a very strong culture of caring for its people. We care about the individual and their family which is reflected in our very low turnover. Many do not want to leave the company and I can tell you that a number of those who do return to us a year or two later. People enjoy the atmosphere of the company and I know that we treat our employees with a great deal of respect.

I think if you’re in a nice environment and being challenged while learning it’s a great place to work.

As such an established company here with over 700 employees how do you manage to be so personal with each employee?

It’s certainly a challenge but we like to say that we’re the biggest small company around! Our, project engineers in our Botofogo office know that they can come to Barra and my office door is open. People know whether you genuinely care about them or not, and part of our management effort is to make it clear how much our employees matter to us.

Culture is a very intangible thing and hard to explain but I know that people like to work with our company.

Looking at some of the opportunities further afield with the Deeptec joint-venture and the newbuilds on the horizon in Brazil with well over 250 to new vessels to come what do you think M-I Swaco can take from here and apply in other markets moving forward?

Our partner in Deeptec operates in the US, the Middle East and Asia so while this partnership started in Brazil because of the growth here, there is no reason to believe that once we prove out the concept and build the expertise that this venture cannot go into other markets leveraging our expertise.

We are bringing existing expertise to the Brazilian market which we hope to enhance and grow before potentially re-exporting elsewhere. Of course, we have to do the job here first!

Is this your dream project or do you have another here in Brazil?

The dream projects here in Brazil are participating in the new rig builds because what we want to do is bring customization to the design process here. This is why we’ve founded a Brazilian joint venture to establish Brazilian expertise.

You can take a North Sea rig design off the shelf but it is not optimized for operations in Brazil. We will design rigs, supply vessels and FPSOs that are purpose built for the local market. Our concept is to produce the designs of the future tailor-made to the location. We utilize our experience to make them less expensive to build, and importantly, more efficient to operate. The real value comes in the operational savings over the life of the asset.

Today, M-I Swaco is an international company with a lot of Brazilian influence that is successfully operating in the local landscape. Where do you want to see it in the next five years?

We want to remain as a market leader but with a larger footprint of offerings in the marketplace. We want to see Brazilians flourishing in our company, both here and overseas. We also have to maintain our standards and respect for the customer. If we do that, then we should achieve both of these goals.

You’ve played an integral role in the development of M-I Swaco. What do you think you bring to these operations?

I like to think I bring a sense of direction to the company in Brazil and act as an opportunity maker. This means that I have to create the environment for my people to excel. I want to make sure they have a good strategy, aligned with the best trained people and the capital available for the growth they desire.

It is also important to ensure that our segments are properly integrated and that we have a balanced portfolio of business.

What would you like to send as a final message to your diverse body of clients?

M-I Swaco would like to continue to deserve the respect that we already enjoy in the market place in Brazil. We will continue to be close to our customers, provide value for money, and continue to seek solutions to our customers’ most challenging problems.



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