A Successful Exporter: Viper Subsea
Breakthrough’s Trade Mission to Brazil has helped offshore oil and gas engineering specialist, Viper Subsea, win a vital contract with exploration giant Petrobras
UK companies that want to export to Brazil “must be prepared to put in the legwork”. So says Neil Douglas, managing director of offshore oil and gas engineering specialist, Viper Subsea. It spent two years gaining acceptance for its specialised engineering products in the rapidly expanding Brazilian offshore market. Nevertheless, when the company was then invited to take part in Breakthrough’s inaugural Trade Mission to Brazil, it seized the opportunity.
Bristol-based Viper Subsea specialises in designing and delivering underwater components, such as hydraulic connectors, for a very demanding industry. “Our main product has to perform on the seabed, at up to 4km depth for 30 years or more,” explains Neil. “It costs a lot to repair such systems if they fail, so we’re engineering high-reliability products that perform in a very challenging environment.”
In 2007, oil and gas reserves were discovered below the deep Cretaceous salts off Brazil’s coastline. These ‘pre-salt’ hydrocarbons lie 6-7km below the ocean’s surface. It is a significant find. Estimates vary from a conservative 50bn barrels of oil – not far off the total reserves in the North Sea – to three times that quantity. Exploration in the region has a hit, or success, rate of 87%, compared with the industry average of 20-25% worldwide.
These oil and gas fields are operated by Petrobras, the world’s 11th largest oil company. The Brazilian government has a 48% stake in the company, and that includes the majority of the voting shares. By 2020, Petrobras expects to be pumping 4.9m barrels a day from Brazilian fields. If it achieves this, it will be ranked one of the top five oil companies in the world.
“If I could choose any company as a customer, it would be Petrobras,” says Neil, understandably.
Keeping it local
However, non-Brazilian firms must overcome considerable hurdles before they can supply Petrobras. Not least the Brazilian government’s rules on local content, enforced by punitive fines and applied throughout the supply chain.
The Brazilian government knows it must invest billions of dollars in exploiting these pre-salt reserves. Naturally, it wants that investment to benefit the Brazilian economy rather than foreign companies. So the products and services Petrobras buys must have at least 70% local content.
“We are a very small part of the total production system, so to begin with local content is not critical” says Neil. “But we have to show long-term intent to move some of our manufacturing or value-add to Brazil.”
Putting in the legwork
Viper Subsea chose not to deal directly with Petrobras’ sizeable bureaucracy. Instead, it focused its efforts on one of the oil giant’s tier-one suppliers. Over two years it consulted with an international trade advisor from UK Trade & Investment, commissioned the Overseas Market Introduction Service to help it make inroads, and made a trip to Brazil. But progress was painfully slow, and with no guarantee of success.
When Viper Subsea received the invitation from Santander’s Breakthrough Trade Mission, it had completed technical, testing and quality reviews for its products, and had even responded to a request for a quote with a keenly priced pitch.
Now, with the help of Breakthrough, Neil was able to set up meetings with Petrobras’ supplier, possible local partners, and – via the supplier – with the oil giant itself.
Face-face conferences in Sao Paulo with Petrobras’ supplier and potential value-add partners went well. But the vital meeting with Petrobras looked as if it would fall through. Then, at 10pm one night, Neil got the call: Petrobras wanted to see him at 11am the next day – in Rio.
Santander’s Breakthrough team quickly arranged Neil’s flights. He was then able to meet with Petrobras, accompanied by the tier-one supplier endorsing Viper Subsea’s product.
“The support from Santander was excellent,” says Neil. “While there was nothing I could do to avoid the changes of plan, not once did I hear a complaint from the Santander team.”
A contract from Petrobras’ supplier came through in the first week of January 2012. The fulfilment schedule is tight – delivery of the products is slated for May/June 2012. But the contract opens the door to millions of pounds worth of business – and that could double Viper Subsea’s size in the next five years.
“Winning that contract is the highlight of my five years at Viper Subsea,” says Neil. “By the time Petrobras’ growth really takes off we will already have a proven product with them.”
Taking the risk
So how much of a difference did the Trade Mission make to Viper Subsea’s eventual success, given that Neil’s team had already invested more than two years’ effort?
“The timing was perfect,” Neil says. “Would I have gone without Santander? Maybe not. I didn’t realise how close we were to winning the contract. Did I think we’d be successful? We were hearing positive noises, but I wasn’t confident that Petrobras would take the risk with us.”
“These are not negotiations you can do by email or over the phone” he concludes. “You have to be prepared to accept the cultural differences, such as meetings being called off or changed at the last minute.”