Latin America Reports

ShawCor Invests in Brazilian Pipe Corrosion Market

By Charles Thurston | October 16, 2006

Shawcor looks to capitalize on Brazil's push in gas pipeline development.

ShawCor Ltd., of Toronto, Ontario, Canada, has acquired a 50% share in a Brazilian anti-corrosion pipe coater in Belo Horizonte, Minas Gerais state, for an undisclosed sum. The purchase of the Eupec Brasil Ltda. shares will complement ShawCor's pipe insulation business in Brazil, and help it tap into the country's booming oil and gas market, according to Gary Graham, vice president of corporate development, ShawCor.

"The South American market is going to be showing good growth over the next few years, and Brazil is a key area, so we are working to position ShawCor there," said Graham. The acquired Eupec unit and ShawCor's existing Thermotite Brasil operation, also located in Belo Horizonte, will be renamed as Bredero Shaw Revestimentos de Tubos. The other 50% owner of Eupec is Delta Premium Trading, which is registered in Panama, but operates in Brazil.

"With both insulation and corrosion capabilities, we now can offer full service to Petrobras. While the end-use is more for energy production, there are some petrochemical applications as well," Graham noted. Brazil's state-owned oil company Petrobras estimates that heat insulation amounts to approximately five percent of the total cost of pipeline installation.

Petrobras in August announced plans to invest $4.4 billion to build out its natural gas pipeline system and to invest $380 million in pipeline maintenance over the next five years. One new project is the Coari-Manaus pipeline, in the Amazon, which will have an estimated cost of $1.3 billion. At the end of 2005, Petrobras operated 12,857 kilometers of oil pipelines and 17,486 kilometers of natural gas pipelines, mostly through its Transpetro subsidiary.

"Petrobras will award contracts for construction to various parties, so our clients may be an engineering or construction company, or the local pipe mill," said Graham. Vallourec & Mannesmann do Brasil, which has a production capacity of 500,000 metric tons of steel tubes per year, is the primary pipe mill in Belo Horizonte.

Overall energy industry expenditures for Petrobras through 2011 will amount to $22.1 billion, according to the company. Follow-on plans for investment include a twelfth refinery, which would have a capacity of 500,000 barrels per day, targeted for export.

The Venezuelan government is a potentially large partner to Petrobras for gas and oil pipeline development in both countries. Petrobras recently signed a joint venture agreement to develop Venezuela's La Concepcion oil field, in Zulia state, which currently produces 12,300 barrels of crude oil per day. A Venezuelan-Brazilian gas pipeline also has been discussed as a potential project.

Another reason Brazil is making a hard push in gas pipeline development is that the new government in Bolivia has decided to nationalize its natural gas production and threatened to raise the price of gas exported to Brazil through a jointly-operated pipeline.

Petrobras is also active in energy development in Mexico, Angola and Nigeria.

Bredero Shaw operates in more than a dozen countries around the world, with some 3,500 employees. Apart from anti-corrosion and insulation coatings, the company provides weight coatings and specialized deep water coatings.