Rolls-Royce is betting big on Brazil, where the company's energy business, recently bolstered by lucrative contracts with Petrobras, is setting up a $100 million-plus purpose-built gas turbine assembly and test facility. Russell McCulley reports.
Petrobras contracts worth up to $650 million, confirmed by Rolls-Royce last month, call for the provision of 32 RB211 gas turbine power generation systems to be installed on eight FPSOs at the Lula and Guará fields in the Santos Basin.
The systems will include waste-heat recovery units and are scheduled to be delivered in sets of four starting in 1Q 2013, shortly after Rolls-Royce's new Santa Cruz package, assembly and test center becomes operational. Under the terms of these contracts, the company will also provide Brazil’s national oil company with long-term services, technical support and training.
The UK-based power systems giant is no newcomer to Brazil; it has been in the country for more than 50 years, providing power systems for Brazil's air force, navy and aviation sector, and employs some 500 people there. But the Petrobras orders mark a major step for the company's energy business unit, says Andrew Heath, president of the Rolls-Royce energy business, talking to OE in Houston shortly after the awards were announced.
'Clearly, this is a big award for the Rolls-Royce energy business- the largest award in our history,' he says. 'We've been involved in some significant pipeline projects around the world. But this comes in as the largest contract award that we've ever achieved.'
Rolls-Royce announced its plans to build the Santa Cruz facility, in the state of Rio de Janeiro, last February, months before the Lula and Guará contracts were finalized. The RB211 gas turbine systems will be among the first equipment to be rolled out.
'We see Brazil as a strategic market, and as a consequence, this [contract award] gives us the platform to expand our infrastructure in Brazil- to train people, to generate a supply base and create a world class facility that will serve Petrobras for many years to come,' Heath says.
Rolls-Royce is also setting up the capacity to overhaul and repair gas turbines in Brazil, most likely at the company’s regional offices in Sao Paolo.
Petrobras has pledged nearly $225 million in capex between 2011 and 2015, with a significant portion of the five-year budget dedicated to E&P. Contracts for international firms come with increasingly stringent local content requirements, however; the Rolls-Royce agreement stipulates that the company provide 35% local content at the contract’s outset and increases to 51% by the time all 32 systems are delivered.
‘The vision of Petrobras is to drive significant local content on the back of these large awards, and we’ve embraced that vision,’ Heath says.
‘When we started to look at this, there was some trepidation about the size of the localization requirement,’ he says. ‘But we’ve had a supply chain purchasing team in Brazil 12 months in advance of this award focusing on supply capability and what’s available to us. And we came to the conclusion that we would be able to meet the localization requirements. It’s helped by the fact that it builds from 35% to 51% by the time the 32nd unit is delivered. That gives us time to continue to develop the suppliers and to work with them to enhance capability.’
A good portion of that will be accomplished through the generators, which will be designed, manufactured and assembled by Brazil’s WEG and Gevisa, a GE affiliate based in the country. Additionally, the steel framework for mounting the gas turbine systems will be procured and assembled locally.
‘We’re already working with some Brazilian companies today, and we are encouraging some of our own suppliers to go to Brazil, as we are, to develop capability there to support the program,’ Heath says.
‘Rolls-Royce Energy has had a long-standing relationship with Petrobras over the last 15 years or so in terms of providing other offshore and onshore oil & gas applications,’ he continues. ‘Our equipment is in service today in many of their offshore locations. On some of those FPSOs and offshore vessels, we have Rolls-Royce employees permanently maintaining and operating the equipment on behalf of Petrobras.’ Brazil, he says, is ‘hugely committed to developing the offshore fields. And we very much want to be a part of that future.’ OE