GE (NYSE: GE) Oil & Gas and the Brazilian energy company Petrobras (NYSE: PBR) have just signed the world’s biggest sub-sea wellhead production contract.
The deal is worth around $1.1 billion, and will see GE deliver around 380 sub-sea wellhead systems and related installation tools to the Brazilian company; more than 75 percent of all the equipment will be manufactured locally in Brazil. The announcement was made at this year’s Rio Oil & Gas summit being held September 17-20 in Rio de Janeiro, Brazil.
From GE’s press release:
“This new agreement between two of the world’s largest companies shows our commitment to collaborate in the development of the oil and gas sector in Brazil,” said João Geraldo Ferreira, president and CEO of GE Oil & Gas for Latin America. “In recent years our investments and efforts have been focused on preparing our company to support market growth and to be ready for contracts of this size, developing the entire supply chain. We want to grow with the country.”
Back in 2009, GE Oil & Gas and Petrobras signed a similar deal for $250 million; at the time, that was also the largest wellhead contract in history (according to the number of wellheads involved).
Petrobras will install these sub-sea wellheads in oil and gas fields around Brazil, including several that are sub-salt. GE will develop the equipment at its São Paulo facility. The company has already invested $30 million there to ramp up production capacity.
Petrobras operates in 27 countries across 5 continents, and it is a leader in deepwater and ultra-deepwater oil production. It operates about 100 production platforms and 15 refineries, with over 30,000 kilometers of pipeline and more than 6,000 service stations.
GE’s Oil & Gas division is rapidly expanding operations in Brazil, with the aforementioned $30 million investment in São Paulo and another $200 million investment in Rio de Janeiro to expand its flexible line plant so as to service the new sub-salt fields being developed.