Major U.S. Firms Return to Brazilian Waters

By Brooke, James | THE JOURNAL RECORD, November 18, 1994 | Go to article overview

Major U.S. Firms Return to Brazilian Waters


Brooke, James, THE JOURNAL RECORD


RIO DE JANEIRO _ Oil and gas companies from the United States are returning to Brazil, their first big effort since 1953, after being effectively excluded for four decades by the country's old nationalist and protectionist policies.

American oil-service companies, sometimes called the pilot fish of the big international producers, turned out in force last month at the Brazilian Petroleum Congress. Competing for an annual market estimated at $1 billion in sales and contracts, 47 American oil-service companies mounted stands.

"Until 18 months ago, the door was basically shut in our faces," said Bob Greenwood, a salesman with Bestolife, a company in Dallas that makes drilling-pipe sealant. "You could ship the product down here, but it would sit on the dock and rot."

Now that Brazil is discarding tariffs and protectionist quotas, American companies have won about half the oil-service market, a survey by the U.S. Consulate in Rio indicated. Other opportunities await production and pipeline companies.

By the end of the 1990s, Latin America is expected to pass the United States and Canada to become the world's second-largest oil-producing region, after the Middle East. Brazil is Latin America's third-largest oil producer, after Venezuela and Mexico, extracting about two-thirds of its oil from wells offshore Rio de Janeiro state.

"With the new government, there is going to be an explosion of this sector," said Etienne Kvassay, a Brazilian trade economist who prepared the consulate's survey. "This market should grow at the rate of 30 percent in the next three years."

Fernando Henrique Cardoso, who will become president on Jan. 1, pledged during the campaign to relax the monopoly that Brazil's state oil monopoly, Petrobras, has enjoyed for 41 years over oil exploration, production and refining.

Cardoso's campaign platform called for the establishment of partnerships and joint ventures between Petrobras and private business.

The president-elect went further in a recent interview with Brasil Energy, an oil and gas monthly. "Petrobras is already a sufficiently mature business to open itself up to partnerships or to competition with private companies," he said.

In Petrobras' largest joint venture to date, two U.S. energy companies, Tenneco and Enron, both of Houston, signed contracts in August to participate as minority partners in the construction next year of a $1.8 billion, 1,400-mile pipeline linking gas fields in eastern Bolivia with the industrial heartland of southern Brazil. The project is regarded as a prototype for future joint ventures valued at $2 billion.

Antonio Luiz de Menezes, Petrobras' project manager for the Bolivia-Brazil gas line, said U.S. companies had also been invited to bid next year on a second Brazilian gas line projected to run 375 miles within the Amazon basin.

Oil exploration may be on the horizon. Betting that Brazilian legislators would approve a constitutional amendment next year to allow foreign joint ventures, executives and geologists from Amoco, Occidental Petroleum and Pennzoil traveled to Brazil for the petroleum congress.

"I'm here to make contacts, to build up relationships," said Don B. Felio, director of new Latin American ventures for Amoco Overseas Exploration Co. …

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