Håkon Ward, General Manager, Kongsberg Oil & Gas Technology, Brazil
Hakon Ward, General Manager of Kongsberg Oil & Gas Technologies, Brazil, gives his insight into the key factors, which ultimately led to the smooth entry of Kongsberg into the Brazilian market, and further discusses the longer-term targets in Brazil, as local content requirements have currently slowed in development.
Since you became General Manager of Kongsberg Oil & Gas Technologies (KOGT) in Brazil in October 2011, what have been your key objectives, and to what extent have these been achieved?
When I arrived, we had just hired two staff members, a Software & Services sales Manager and a senior engineer. They were originally under contract to Kongsberg Maritime do Brasil pending the legal registration of Kongsberg Oil & Gas Technologies do Brasil as company, which took a while to conclude. For this reason, having the support of another Kongsberg company already established here in Brazil was of great use for KOGT when we first entered the Brazilian market and since then, the two Kongsberg companies have continued to work closely here in Brazil.
Kongsberg is a conservative company: it seeks to build its business stone by stone, brick by brick. When KOGT moved into Brazil, the first objective was to demonstrate that the company would be self-sustaining. KOGT also benefited from connections to Brazil inherited from Seaflex AS, the company I previously worked for, which was later acquired by Kongsberg Oil & Gas in Norway. Seaflex’s first contract had been for a Brazilian company in Salvador, Bahia and in the years to come the company developed close business relationships with other Brazilian companies. This meant that KOGT had a number of very positive commercial connections here in Brazil, which the company has been building productively on since fully entering the Brazilian market.
The advantages of this preexisting connection were enviable—experience of the market and solid customer relationships meant we could really capitalize on the presence of an ally in Kongsberg Marine. I myself have been traveling between Brazil and Norway for around 20 years so my familiarity with the market means I can say with certainty that these factors were very useful to KOGT when entering Brazil.
I understand that Brazilian business relationships can be very personally orientated, as opposed to being arranged company to company. Did your experience with Seaflex assist you in gaining further business connections?
Absolutely! Brazilian commerce is very much about personal relationships. One challenge KOGT faces here in Brazil is that we are still few in number and this means more work needs to be done in connecting personal networks to a stronger, more widely known KOGT brand.
Commonly, sales staff will act as the face of KOGT when engaging in business events, from formal meetings to business lunches—there is a great reliance on these staff to properly reflect Kongsberg’s values.
Kongsberg itself is a widely renowned brand, and this certainly allows us to interest new contacts, as the whole group has a reputation for quality and reliability. Ensuring that potential clients understand we offer services beyond that of our maritime sector is important in establishing our independent identity as a newcomer to the market.
You have told us about the benefits of having contacts existing in Brazil prior to your arrival, and spoken about the strength of the Kongsberg brand. Can you expand on how your portfolio of clients has developed since your arrival—for example, what is the balance between local and international players across your contracts?
Basically when KOGT arrived, the portfolio consisted of one client, which gave us the ability to initiate some engineering activities and provided the company with some momentum to begin growing here in Brazil. Over recent years competition has increased, and regulation and tax systems have become more challenging and for these reasons the importance of having a local presence in Brazil was, and remains clear; any company needs to be in close proximity to the market and its clients here in Brazil, KOGT being no exception.
Secondly, KOGT realized the importance of developing further contacts. The company is made of two divisions, one focused on the subsea market and the other on software and services. The former was our initial means of creating revenue in Brazil but since arrival, the software and services industry has now expanded very successfully due to the efforts of our sales staff.
Kongsberg’s technical department (R&D) is based in Norway. To what extent does KOGT act as an interface between technical developments in Norway and the Brazilian market?
Kongsberg group’s R&D sector will remain in Norway for the foreseeable future and KOGT will remain as a connecting link between the department and the Brazilian market for that time. The software services KOGT provides here in Brazil have been developed mainly in Norway, but have had some input from an Indian business recently acquired by Kongsberg. At the moment, Brazil does not have such a unit; the business here focuses on providing solutions.
Sitecom is one of Kongsberg’s premium products, how is the Brazilian market reacting to opportunities provided by live-monitoring software?
The Brazilian market is decidedly moving towards live-representation of data. The clear development trend in this market at the moment is towards real time data, real time decision support and monitoring of operations. Sitecom is superbly tailored to these requirement and we are pleased to see important market players, such as Petrobras, recognize the importance of this type of software.
To give some further idea of the opportunities KOGT’s software offers, Sitecom offers the ability to monitor offshore operations from any location in real-time. Petrobras in particular seems happy to have this capacity on their onshore premises, allowing them to control production carefully and continuously. KOGT is able to provide these services 24/7 to clients.
Another facility KOGT offers, which is of particular use to the offshore Brazilian market, is through our K-Spice and Ledaflow software systems. Together they are an integrated solution, delivering process simulation and multi-phase flow simulations. KOGT is the sole provider of this holistic system. By having these tools, clients have access to a far more detailed understanding of the whole process of production, from drill-bit to wellhead.
Strategically speaking, Kongsberg have indicated they wish to be more involved with brown field sites. To what extent can KOGT assist advanced oil recovery, what is the scope of this market in Brazil, and what strategic value does KOGT place on technology for this end in Brazil?
Absolutely! By providing these services KOGT can assist Petrobras or other players in maximizing the extraction of oil from mature fields. This assistance can be deployed from early on in the process, ensuring drilling operations are set up in a way in which they will secure maximum returns later, or that the subsea network will operate in the most efficient way. The Ledaflow software, combined with K-Spice is a key tool for any company seeking to optimize its extraction processes.
The need for this facility in Brazil is acute; KOGT expects to be highly successful in delivering these solutions across the market in Brazil.
ApplyNemo, Seagear and Advali have all been acquired since 2011. What extra capabilities have these acquisitions given KOGT? How has this affected KOGT operations here in Brazil?
Advali was already assisting Kongsberg with services related to our IT products so this was a very natural acquisition.
ApplyNemo, the foremost largest acquisition this year, was a perfect match for KOGT due to their products, technology focus and strong presence in important geographical markets for KOGT. KOGT wishes, in the longer run, to be an effective EPC business, and for this, products, designs and manufacturing or procurement capabilities are essential. Acquiring Nemo was a strategic choice and raised KOGT’s standing in the market; subsequently, through this acquisition KOGT was able to bid and later be awarded a US$ 63M contract with Statoil for the delivery of Subsea structures, in-line tee’s, tie-in and connector systems for the Polarled gas pipeline in the North Sea.
The EPC ambition of KOGT is a longer-term target here in Brazil as local content requirements have slowed development of this aspect of our business. KOGT will adapt, however and ensure growth in this sector through joint ventures or acquisition of a local company.
Software and Services for the moment are the mainstay of our company, though we would like to see EPC services contribute significantly to KOGT’s revenue here in Brazil in the near future.
Statoil recently signed a four-year framework agreement with KOGT to provide Riser Integrity Management Services for the Pelegrino field, with the option for a two-year extension. Given they are the second biggest player in the Brazilian market, this is highly exciting and it really represents a breakthrough in this market for KOGT. We hope, of course, that our extensive experience providing Riser Integrity Management Services worldwide along with this contract will open up for other opportunities here in Brasil.
Whilst the subsea market in Brazil is at the moment growing, it is not yet one of the key global markets for Kongsberg. That being said, this deal along with the business already on-going within the Software & Services division will certainly go some way towards increasing Brazil’s value in our global portfolio.
Brazil has already yielded several important contracts to KOGT’s software this year and next year looks very promising. In our third year of operation, we will have moved into profit, which in most assessments of performance is remarkable.
How have these contracts assisted KOGT in establishing its own, independent brand here in Brazil?
Talking specifically about the Statoil project first, Kongsberg does have a close relationship with Statoil in Norway. However, the staff here in Brazil had to be engaged with the Kongsberg brand anew. Here KOGT needs to stand on its own feet and create the conditions for business to happen. Engaging with Statoil independently here was a great success for KOGT in Brazil.
The Statoil contract was effectively a local reference project in the subsea market, which we are very happy with. Our software section has also done very well, securing highly important contracts with Petrobras.
KOGT’s brand, solutions and services are gaining recognition throughout Petrobras, which is remarkable given KOGT’s length of tenure here in Brazil. Petrobras’ appreciation of our services, and adoption of software such as K-Spice and LedaFlow for its projects in the Santos Basin mean that we are now an important player in the Brazilian Offshore market.
To what extent is recruitment still a problem—has KOGT been able to acquire all the staff it needs?
This is still an issue. Recruitment wise, the market is booming in Brazil. There are two aspects to the staffing challenge: finding staff, and retaining staff. The large salaries available across this market are responsible for the tendency of some applicants to move whenever a larger salary is offered. Kongsberg looks for staff that is committed to longer-term growth with our company, who will follow the company’s values of determination, reliability, collaboration and innovation.
With regard to KOGT’s future ambitions, where do you see KOGT here in Brazil in five years’ time?
I imagine that KOGT will have further developed its EPC capabilities and ambitions, products and client base across the market. I do not envisage that this will happen from solely organic growth, because that path would simply take too long to ramp up revenue. For this reason, I think acquisitions or at least new joint ventures with local companies can add value to KOGT as a useful and sensible path for the company.
These are both routes to establishing a manufacturing base and that is something I would be pleased to see here in Brazil.
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