IMI: Brazil Oil and Gas Best Sales Prospects and Highlights

11/23/12

Petrobras project portfolio includes 980 projects that will require investments of USD$236.5billion between 2012 to 2016. Of these projects, approximately 833 projects valued atUSD$208.7 billion have already been approved and are being implemented. The remaining 147projects, valued at USD$28 billion are still being reviewed by Petrobras to confirm their viability.In a recent presentation, made during an oil and gas industry association event, Petrobrasstressed the need to get lower bid prices and for the stricter fulfillment of delivery requirementsin order to meet the goals and objectives of their ambitious business plan.Petrobras is reviewing all their projects in order to implement a cost reduction plan. A Petrobrasspokesperson stated that Petrobras supports local content (LC) and will increase its LCrequirements even in situations where they are not obliged to do so by contractual clauses.However, Petrobras will continue to closely monitor price levels and delivery time issuesregarding their domestic suppliers. Petrobras LC Department will prepare reports listing LCrequirements on a project-by-project basis and will also report actual fulfilled LC requirements.The spokesperson highlighted the fact that Petrobras holds the largest number of offshore oilprojects in the world and the sheer size of their ongoing and upcoming projects are attractingmany foreign equipment and service suppliers that are opening up or expanding their facilities inBrazil. It's Petrobras goal to establish long-term business relationships with its suppliers aslong as they have competitive prices and meet their delivery commitments.

As an example, Petrobras showed the table below to illustrate cases of foreign companiesexpanding their current facilities in Brazil or opening up new facilities to meet Petrobras andother oil companies LC requirements:

Products/Equipment Companys expansion plans in Brazil

Subsea pipes NKT Flexibles: new plant of flexiblelines in Brazil in 2013

Technip group: opening up a new plant

GE Wellstream: By 2013, their currentplant will be expanded by 60%.

Prysmian: plant explansion to produceflexible lines

Butting: building a new plant tomanufacture pipes

Umbilicals Duco & Nexans: discussing new plants

in Brazil

Oceaneering (MSD): current plantcapacity is expected to double in 2013

MFX: 80% plant expansion by 2013

Subsea equipment Aker: will grow their plant capacity

FMC: same as Aker, and will build anew R&D center

GE: expansion of its Jandira plant andconstruction of a new unit

Cameron: industrial expansion

Turbo machinery Rolls Royce: building a new unit inSanta Cruz (Rio) for turbo generators)

Dresser Rand: building a new unit inSanta Brbara do Oeste (for turbocompressors)

Offshore cranes MEP Pellegrini: will build a plant inBrazil in partnership with a localcompany

Drill pipes V&M do Brasil: Adapting currentfacilities to produce drill pipes

Corrosion Resistant Alloys (CRA) Pipes V&M do Brasil: is producing alloysresistant to high corrosion

Large diameter tubings/pipes Usiminas: is obtaining technicalqualification for its current facilities

Offshore steel structures Metasa (Brazilian company):announced investments to expandcurrent facilities to produce metallicoffshore structures for oil rigs

Automation Emerson: industrial expansion toassemble equipment in Brazil

Source: Petrobras July 2012 presentation at the ABIMAQ event

In conversations with trade contacts, CS Rio learned that several of these major (multinational)original equipment manufacturers (OEMs) have, in turn, been trying to attract their supply chaincompanies to establish facilities in Brazil. However, in many cases, due to the speed andnumber of oil and gas projects in Brazil, a large percentage of certain components, auxiliaryequipment, parts, and peripherals will continue to be imported in order to meet delivery timesand technological requirements.

At the same time, the following broad list of equipment and services can be considered bestsales prospects for Petrobras, given the companys high demand:

Equipment and materials required for 2012-2017 (according to Petrobras, the list belowdoes not exhaust all the equipment and materials required for this timeframe):

Equipment/Materials Unit Total (2012-2017)Pumps Unit 4,386

Compressors Unit 387

Cranes Unit 93

Structure steel (ships hull) Tons 453,850Structure steel (FPSO hull) Tons 1,092,000Structure steel (rigs hull) Tons 560,000Flares Unit 46

Power generators (13.8 kV) Unit 299Power generators (0.48 kV) Unit 158Tanks Unit 684

Processing towers Unit 295

Reactors Unit 189

Wet Christmas trees Unit 1,135

Offshore wellheads Unit 1,307

Dry Christmas trees Unit 2,047

Onshore wellheads Unit 2,049

Manifolds Unit 99

Umbilicals Kilometer (km) 6,492Tubing/pipes (onshore) Tons 172,084Tubing/pipes (offshore) Tons 83,682Flexible pipes Km 5,977

Risers Km 2,361

Turbines (gas) Unit 151Turbines (steam) Unit 203Special alloys for tubingand casing

Tons 41,325

Turbo generators Unit 138

Polyester mooring cables Km 1,147

Fiberglass pipelines Km 1,966

Electrical cables for CSP(oil, ozone and heat resistantelastomeric compounds)

Km 38,485

Steam generators Unit 0

Hcc reactors Unit 9

Special alloy boilers,reactors, towers, andpressure vessels

Unit 219

Heat exchangers Unit 196

Reformer furnaces Unit 9

Source: Petrobras presentation at the BRATEC Houston event, May 2012

In view of Brazilian oil and gas policy relating to local equipment and services contentrequirements, CS Rio encourages U.S. suppliers to seek partnerships with local Braziliancompanies at their earliest convenience because as more and more international firms come toBrazil later entrants will find lesser quality partners and likely face higher market entry costs.

The US Commercial Service offers a host of services to assist U.S. companies to export or gointernational. If you are interested in learning how we can help your company, please find, onthe following link, and contact your nearest U.S. Export Assistance Center:http://export.gov/usoffices/index.asp

Additional information on the Brazilian oil and gas sector, including upcoming trade shows inBrazil and various informative power point presentations can be viewed at:http://export.gov/brazil/industryhighlights/energy/eg_br_023986.asp