Petrobras plans to invest US $4.5 billion in R&D over the next five years, especially on advancing technologies for ultra-deepwater oil production. “We are encouraging industrial groups to set up research centers, including foreign companies, that will register or apply for patents in Brazil,” said Aloizio Mercadante, former R&D minister and now education minister.

The company’s future plans are mainly directed for the development of deepwater oil exploration in the Atlantic Ocean below a thick layer of salt. Estimated at 50 Bbbl or more, these discoveries could more than triple Brazil’s 2011 proven crude oil reserves of 16.4 Bboe.

The goal is to prepare the country to become the fifth largest oil producer. Also, by overcoming materials and equipment challenges, the Brazil government is working to rank among the main exporters of crude.

Seeing Brazil as a good investment opportunity and recognizing the quality of local universities, the biggest suppliers of Petrobras are establishing an intellectual partnership with the company in addition to trade ties. The minister cited biotechnology, biofuels, and environmental research among the projects being developed.

Cenpes (Centro de Pesquisas Leopoldo Americo Miguez de Mello) is the Petrobas R&D center, created in 1970 at the campus of the Federal University of Rio de Janeiro (UFRJ). Since 2005, Cenpes has invested $700 million modernizing and expanding its facilities. This has attracted international firms with operations in the Brazilian oil industry including Schlumberger, FMC Technologies, GE, Halliburton, Cameron, and Baker Hughes.

The investments in the experimental infrastructure Cenpes constructed are critical for implementing a technological strategy. The physical space of the R&D center has nearly doubled. Another 183,000 sq m (2 million sq ft) were added on, reaching 297,000 sq m (3.2 million sq ft) and making it one of world’s largest applied research centers. Research facilities at decentralized sites add another 276,000 sq m (3 million sq ft).

The new Cenpes facilities were inaugurated in 2010. In addition, Petrobras also has semi-industrial experimental plants, operational in several Brazilian states, integrated into its industrial units. “Cenpes has become the largest research center in the southern hemisphere and one of the five largest in the area of oil and gas worldwide,” Cenpes General Director Carlos Tadeu da Costa Fraga said.

Cenpes installations include a 3-D simulation dome for group visualization of presalt projects.

Resources for developing solutions

In recent years, Petrobras has consistently ranked among the world’s top five investors in energy R&D, investing around 6% of revenue. Growth is not limited to the skills of the workforce.

The financial resources earmarked for R&D at Petrobras have been increasing, especially over the last five years, keeping pace with the mushrooming investments the company has made in other areas. The company has a larger number of industrial projects, and its technological challenges also have multiplied. Of around $2.7 billion invested in R&D between 2009 and 2011, 59% was allo- cated to E&P and 21% to new processing, refining, and petrochemical technologies. Although only 2% was allocated to biofuels, this represents $31.7 million, ranking Petrobras among the top 10 investors in biofuel R&D in the world today. The amount of research dedicated to environmental issues focuses mainly on atmospheric pollution and water resource management.

Cenpes research facilities

Research is simply not possible without quality laboratory infrastructure, and Brazil’s current legislation for the oil and gas industry has enacted incentives for innovation.

If the development of an exploration block in Brazil leads to significant production, operators are required to spend 1% of the value of future production on local R&D.

For now, the 1% rule only has a significant impact on Petrobras, with an R&D budget of $1.2 billion. International operators also will see their obligations surging as production from recent finds come online.

Industry-wide, the 1% obligation is expected to generate a cumulative total of $9.5 billion in R&D spending in Brazil by 2020, according to a National Agency for Petroleum, Natural Gas, and Biofuels survey estimate. Actual spending will depend on the vagaries of oil prices and production growth as well as possible changes in the laws governing how the oil money is spent.

By building domestic innovation capability, the government not only is driving Brazilian science and technology but also reaping direct benefits, whether in terms of human resource training or in attaining higher quality and faster results from joint research projects.

Cenpes has 130 laboratories and 30 pilot plants, employing a technical staff of approximately 1,800, of whom 807 are graduate researchers and 314 are engineers responsible for the early design stages of major undertakings.

This is a genuinely unique arrangement since few oil companies have their basic engineering teams actually inside their research centers, bringing designers and researchers closer together and encouraging the application of technological innovations in the company’s engineering projects. Petrobras currently is investing more in training its personnel than at any other time in its history.

Approximately 511 technicians are operating and maintaining Cenpes’ experimental facilities, which range from conventional laboratories to semi-industrial experimental plants, some of which are located within the company’s production facilities. This also brings technology development nearer to implementation.

The Petrobras R&D facilities at Ilha do Fund?o (Fund?o Island), Rio de Janeiro, include 227 new laboratories, making it the largest research center in the southern hemisphere and one of the five largest in the area of oil and gas worldwide. (Images courtesy of Petrobras News Agency)

R&D partnerships

Very substantial input is due to significant experimental infrastructure investments in partner institutions (universities and providers of goods and services in Brazil). Cenpes works closely with these partners, sharing facilities and developing solutions together.

Petrobras has invested on average around $300 million per year in Brazilian universities, with consistent input over the past three years.

These “Thematic Networks” are projects that are being developed in laboratory facilities built at Brazilian universities under Petrobras’ management model for technology. The partnerships are approximately four times larger in terms of area than existing Cenpes facilities. It is estimated that for every Cenpes researcher there are about 15 external researchers working at universities, suppliers, and partner facilities due to these networks.

This growth was rapid and made possible after the company identified 50 strategic issues in the oil and gas sector and selected potential partners for each of them. Today, Petrobras has more than 100 Brazilian R&D institutions working in partnership with Cenpes.

With the advent of presalt E&P, the scale and complexity of the demands on Petrobras have grown considerably, requiring an expansion that has made Brazil’s oil and gas technology facilities among the best equipped in the world.

Many traditional suppliers also have turned to Petrobras for long-term strategic partnerships involving cutting-edge technologies and technical expertise.

The pioneer was Schlumberger, which in 2010 inaugurated the Center for Research in Geo-engineering and has since contracted 50 Brazilian researchers. The center plays a leading role in presalt carbonates in deepwater and ultra-deepwater fields.

Three specially designed, fully integrated laboratories for testing and evaluating rocks and fluids in controlled environments were installed at the Schlumberger R&D center. In addition, the geo-engineering technology center for developing end-to-end geosciences and geo-engineering workflows is using the Ocean application development framework and Petrel seismic-to-simulation software.

It also hosts a WesternGeco GeoSolutions Hub that provides seismic data integration-optimized solutions to address specific regional challenges. The center has 10,000 sq m (107,639 sq ft) of office, laboratory, and conference space and staffing capacity for 300 people. Ongoing research programs are a multiteam effort of Schlumberger companies (Drilling & Measurements, Smith, M-I SWACO, Geoservices, and TerraTek Geomechanics Laboratory) and include marine electromagnetics, petrophysics, reservoir engineering, geomechanics, drilling optimization, and completions.

BG Group announced that it will invest close to $1.5 billion in its Global Technological Center in Rio de Janeiro by 2021. BG expects its annual R&D spending in Brazil to rise from zero last year to $50 million/year by 2014, to $100 million/year by 2016, and to more than $200 million/year in 2021, according to Damian Popolo, BG technology manager in Brazil.

Additionally, Baker Hughes is opening a technology center at Campinas, Technip has opened a research center in Esp?rito Santo state, and IBM has opened a technological center in Rio.

According to the calculations of the Rio de Janeiro state government, these companies together have invested approximately $303 million.

Andy O’Donnell, president of the Western Hemisphere for Baker Hughes, sees the company opening a new level of collaboration with customers and universities in Latin America. “They will build together a new generation of highly specialized wellbore construction tools and services to economically produce the presalt reservoirs offshore Brazil. Besides strengthening the capability to provide local solutions, the new center in Brazil represents the next phase in the expansion of Baker Hughes’ global technology network,” he said.

Cenpes also seeks to strengthen its international ties with universities and research institutes to act as the linchpin between these scientific institutions and some of Brazil’s major suppliers. This is paving the way for faster technological development throughout the entire energy sector supply chain. One example is the Glasgow Caledonian University (GCU), which signed a Letter of Intent to work with UFRJ, focusing on its School of Engineering and Built Environment and UFRJ’s Cento de Technologia.

And FMC Technologies has opened a $40 million subsea research center at UFRJ, the largest subsea technology research center in South America. As GCU has a five-year collaboration agreement with FMC Technologies in Scotland to undertake R&D in new sensor developments for the subsea oil and gas industry, the agreement between the universities also can lead to the development of new collaborative R&D activities between GCU, UFRJ, and FMC Technologies.

Innovation and practical application

The Petrobras 2011-2015 Business Plan calls for $224.7 billion of investments and is a robust plan backed by a portfolio of highly attractive opportunities.

It was conceived to move the Brazilian oil-related goods and services industry forward, providing development opportunities in equipment, services, and technology for an internationally competitive oil and energy sector.

The company’s vision is supported by a coherent technology strategy, driven by business goals and founded on long-standing, tried, and tested technological competence, with strong investments in generating and, above all, applying knowledge. This practical application is guided by four principles that orient research project management: strict alignment with business and a focus on results, implementation of technology solutions, technology cooperation, and building local capacity. Increased investments at Cenpes are aimed at further implementing these goals and spurring technological innovation.

“At Petrobras, innovation is viewed as the practical application of the knowledge acquired to ensure that it is translated into positive business results,” Fraga said. “We are convinced that innovation is the only path to success in today’s highly competitive environment.”