with Patrick Postal, Country Manager, CGGVeritas Brazil
CGGVeritas is a global geophysical company. Could you tell us about the importance of Brazilian operations for your business?
You’re right; CGGVeritas is a truly international company with a strong presence in all the active E&P regions around the world. With respect to our Brazilian operations, they are not only important in terms of revenue or percentage of income, but also for the prospects they offer for the future. Brazil is seen by our company as a land of mixed short-term and mid-term potential and even brighter long-term opportunities, making it a highly relevant country for CGGVeritas.
Despite ups and downs, as in any country, Brazil is a country where we have been active for many years, since our company started operating here in 1961. At that time it was a purely land business, but since the end of the 1990s we’ve moved from land to sea operations and today we are mostly active offshore. We have also recently resumed land operations again.
In terms of income generated, the contribution is sizeable especially through the sales of licenses prompted by the surge in acquisition activity over the last seven or eight years, and particularly in the pre-salt area. Our data processing and imaging activity in Brazil is also a strong contributor and has been doing very well. In one way, it is not significant because at group level it represents a small share of our business but in another way it is very important. Our advanced imaging capabilities lower our clients’ risks by giving them insights into the earth’s subsurface that were not possible before, they are critical to our data library business, and are good examples of our leadership in high-end technology and are important to our global reputation as the leading geophysical services provider. The business is growing rapidly, it is of high quality —the best you can find in Brazil— reinforcing our company’s excellent image.
CGGVeritas has been proactive recently to offer a large and versatile high-end fleet. How far was this strategy driven by your desire to operate in the waters here in Brazil?
Naturally the highly prospective Brazilian offshore market is important to CGGVeritas but it was more of a general concern to pursue a sustained program of fleet modernization and invest in new technology so that we can continue to offer the latest innovations and capabilities in acquisition methodology such as our leadership in wide-azimuth to further our position as the marine acquisition partner of choice.
Several recent and significant discoveries such as the Tupi, Jupiter, and Carioca fields were found on CGGVeritas seismic data, bringing a lot of attention here to the Brazilian market. Now that the attention is here, and you have these marine capabilities, how do you ensure that you keep getting the contracts to explore these regions?
Well nobody knows what tomorrow will bring, of course, but our goal is to ensure that we can provide the highest quality data to our clients when and where they need it. The fact is that right now we are still selling data we acquired three to five years ago, in addition to the data we are currently acquiring. The big question is what types of new surveys we will be launching later in 2010 or 2011. I cannot answer this question today, because it depends on too many variables including the tenders offered by Petrobras or other major companies, as well as on whether CGGVeritas launches further multi-client surveys with the security of sufficient pre-sales.
Of course, we have prospects; there are those we have been discussing with clients and also those we are working on by ourselves that we would commit to if the right conditions are met.
Petrobras’ five-year plan allocates over $86 million to exploration and production activities. Sitting at the top of the value chain, what are you doing to position yourselves to get those allocated funds in order to be one of the companies out there making the new finds for Petrobras?
With nearly 50 years of continuous business here in Brazil, we’re looking to understand the market by staying close to our clients to anticipate their needs. Of course, when you mention the figure quoted by Petrobras for their exploration and production, it’s a large amount but the share devoted to seismic surveys is quite small in comparison. It’s therefore not really a question of what share but rather a question of understanding what Petrobras’s requirements are and where they would like to go in terms of developing a better understanding of the geology of their own blocks or preparing for blocks to be awarded by the ANP in a future round.
The Brazilian market only opened in 1997, which led to a few international operators entering the market. As you are in the geophysics business and you sit, again, at the top of the value chain, you must have a better perspective on what the industry will look like in the future. Do you see a lot more independent or international operators coming to explore the Brazilian market?
I would say that there have been three periods. The first was from 1997 to 2006 when the business model ran more or less as it was originally set up to run. During this period a number of global companies entered Brazil and local companies entered the oil and gas business. The fact is we saw a number of International Oil Companies and Independents coming from outside Brazil and obtaining concessions which was an achievement for the Brazilian system. We also saw a whole new breed of Brazilian junior companies entering the market.
From 2006 to 2009 unexpected events occurred within the way the oil and gas system was running, such as rounds being cancelled and blocks being taken out of bidding. It was nothing serious but at the end of the day it cast a different light on a system that had succeeded in attracting a lot of interest.
Now we are in a third phase where we can see a form of a secondary market with companies leaving and selling assets while other players are looking to buy these assets. For instance, Sonangol bought Starfish and BP recently bought Devon’s assets which are examples of big names entering Brazil in a very significant way.
Other companies have decided to leave Brazil to rearrange their portfolios to get the full value of their assets for their shareholders.
You mention the uncertainties in the market over the past several years. Of course, in 2008 CGGVeritas took a renewed cluster survey approach to blocks in the pre-salt region and expected by 2010 for the new blocks to be appropriated. Of course, uncertainties have made that less the case. How has this impacted your business in Brazil?
Well, it certainly impacted our business but based on the tremendous success in this area, supported by our data library, we continue to see interest from additional clients.
There are two factors that would further realign our original business decisions with the changes in the market: either a new ANP auction, whenever it is announced, which could possibly happen in the latter months of this year or next year. At that time we would be able to sell our data to many interested parties. The other option is that there may be large oil and gas companies with strong offshore deepwater operation capabilities who would like to partner with Petrobras, if the new model is adopted the way it is being proposed to the Congress. These companies might be interested in accessing our data so they have the adequate information to discuss with Petrobras.
Globally for the geophysics industry, it has been a rougher time than in 2007. What has the experience been like in Brazil? Would you say the experience has been the same as the global industry?
It has been somewhat different I think, for two main reasons. Firstly, as similar to other large National Oil Companies who manage their assets over the long term, in Brazil, there is Petrobras who did not change their capital expenditure program. Secondly, concession-holders were still in the process of building their oil and gas properties. People received their concessions and they had obligations to invest in seismic surveys in a set period of time.
There are a lot more companies with their eyes focused on Brazil now and a lot of innovative technologies out on the market. CGGVeritas has been around for nearly 80 years and always been known for cutting-edge technology in the industry. What do you think is on the boiler-plate for CGGVeritas to stay one step ahead in the industry?
For offshore acquisition, we have our Sercel Nautilus steered Sentinel solid streamers which are already available on two of our seismic vessels and should be available on four more vessels by the end of this year. Wide-azimuth is a very effective advanced technology which we operationally brought to the market and expect to generate considerable interest in Brazil, particularly as the pre-salt fields are developed. It provides information previously unavailable with older techniques and a much clearer image for a more accurate interpretation of the reservoirs in this complex salt environment. In data processing, we have advanced new imaging technologies such as our unique Tilted-Transverse Isotropy Reverse Time Migration (TTI RTM) which can be applied to reprocess and enhance vintage data, introducing even greater potential to define new prospects and better manage reservoirs. And as always we have new technologies in the pipeline that we will announce as they become available later in the year.
Do you think of Brazil as a market that will push the technological boundaries of your organization forward? Is this a market that will demand the high-end technology that your organization can put together?
It certainly is an exacting market in terms of technological requirements and it’s becoming increasingly so. There are two reasons. One is the business itself: there are natural conditions and constraints that you have to face to do your job. Just think of the challenges involved in exploring and producing in the pre-salt area. Secondly, Petrobras is a highly competent and consistent company with a very strong technology focus.
Do you see Brazil as playing a strategic role in helping to develop technologies for the company?
We recently opened our Technology Center in Rio. Its mission is to bring our technology closer to our clients and allow us to work with our key clients in order to bring relevant technologies to the market. We want to solve technological questions in a manner that is completely dedicated to the local challenges, conditions and local clients.
This Technology Center will be largely dedicated to Petrobras but it will also be open to other clients if they wish to join. There are also agreements with local universities to contribute to the projects conducted at the Center.
What drove the company to recognize Brazil as one of the locations to create such a Technology Center?
It’s not the first Technology Center we’ve opened; it’s the eighth. There are several attractive reasons: the size of the market and the magnitude of the technological challenges, and also the sheer nature of Petrobras as a very large and technology-oriented company.
Where do you personally want to bring your organization here in Brazil to move forward?
I think we can innovate and promote new business models in the way we work with our main clients and in the way we manage technology. We may even come up with systems that would be designed to fit specific needs in Brazil that could be used to meet needs in other parts of the world. This is why it is exciting when you open a Technology Center, because you’re not trying to reinvent technologies that people already have in other places, but new real breakthroughs.
Do you see this as a starting point for working with Petrobras not only in Brazil but also with other major operators in other countries?
Exactly, you can see Brazil, with the recent challenging and significant pre-salt discoveries, as an excellent location for innovating better ways of doing business and creating technologies to meet the challenges of the future.
You’ve been here for seven months – what is the biggest thing you’ve accomplished in that time or that you want to have achieved by the end of the year?
We want to be the reference contractor in marine seismic surveys in Brazil as we already are the reference company for processing. We have to continue to bring in more high-end vessels to enhance our marine service offering and we are restarting land operations on a small scale. Currently, we have one very small operation that is a permanent monitoring survey of a CO2 storage facility which is not typical today of a seismic company but we are studying opportunities for this technology.
Generally speaking, my objective is to make CGGVeritas here in Brazil the reference in geophysics. It takes good people, and we have an excellent team here in Brazil. Looking forward, as we continue to grow, this will continue to be a key challenge – finding the right people here locally and abroad.
This shortage of talented personnel is an international problem, no?
It is and this means we have to attract people into our industry. This will take excellent opportunities for them to excel and achieve their career goals. At CGGVeritas we have a lot to offer. A good atmosphere, a global operation, and our unique position of covering the whole spectrum of geophysical services which means we can promote geographical and professional mobility to give our people the solid grounding they need to confront the challenges of the future. As a large international company, we have the global reach and scope of disciplines to offer our employees the chance to gain operational and/or technical experience in a variety of contrasting and highly motivating locations and business situations.