Steps to Succeed in a Latin American MarketWed, 01/21/2015 - 22:54
BG Group’s Brazilian subsidiary, BG Brasil, celebrated its 20 years of operations in 2014. Its acquisition by Shell in 2015 made waves, but the company’s growth in Brazil, where BG Group is the leading oil and gas producer, still provides an engaging case study that could be applied to the Mexican oil and gas sector. The group opened its first office in Brazil in 1994. Attuned with its corporate strategy, in 1999, BG Group acquired a controlling interest in Comgás, a Brazilian natural gas distribution company. This helped BG Brasil become the largest natural gas distributor in the country and, that same year, it participated in the construction of the Brazil-Bolivia pipeline. Once BG Brasil had secured a leading position as a distributor, it then entered the oil and gas exploration segment.
The company participates in five large pre-salt blocks in the Santos Basin and operates ten blocks in the Barreirinhas Basin. Between 2000 and 2005, the oil company acquired its blocks in the pre-salt Santos Basin. Several important discoveries were made in this basin in 2006, including Petrobras’ discovery of the Lula field. Brazil’s national oil company owns 65% of the Lula oil field, BG Group owns 25%, and the remaining 10% belongs to Galp Energía. In a second bidding round, BG Brasil acquired three pre-salt non-operated blocks operated by Petrobras in the Santos Basin: BM-S-9, BM-S-10, and BM-S-11. Commercial production in the Lula oil field began in January 2010. Since then, the output has increased steadily,
almost doubling every year. Today, production from this field accounts for 15% of Brazil’s daily total oil and gas production. BG Brasil has also participated in the development of the Barreirinhas Basin, where it began operating ten blocks in 2012. In 2014, BG Brasil began using four FPSOs to carry out exploration activities in this area. When only considering BG Brasil’s share in pre-salt deepwater blocks in the Santos Basin, where it is a minority partner with Petrobras, the company has achieved record production of 100,000boe/d. BG Brasil’s activities are estimated to deliver 2.6 million boe/d of gross capacity. Since 1994, BG Group has invested over US$8 billion in Brazil’s oil and gas sector, and the oil company plans to spend US$3 billion annually until 2018. On the industrial side, Brazil became the center of BG Group’s global R&D strategy, with an investment of US$1.5 billion being made between 2013 and 2015. The pillars of the technology model were to develop research, attract innovative companies, nurture entrepreneurship, and apply technical solutions. 1% of BG Group’s oil revenues are invested in R&D, as this is crucial for the development of pre-salt fields. US$1.5 billion are estimated to be invested in the company’s R&D division in the next years, and partnerships with universities and industrial partners will continue being key.
Following the acquisition by Shell, BG Group can now combine its Brazilian experience with Shell’s financial, operational, and technological clout to replicate this success in Mexico.