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Homegrown success

-- FROM THE FULL PICTURE MAGAZINE --

When Seadrill came to Brazil, it started by building up a Brazilian organization under Brazilian leadership. This decision has paid off in many ways over the past two years. The company now has four rigs operating there, with plans for many more.

One of Seadrill's rigs outside Rio

The Full Picture Magazine met Eduardo Antonello, the Brazilian director of Seadrill's operations in Brazil, at the company's new offices in Rio de Janeiro. From here, we have a breathtaking view of the entrance to Guanabara Bay, where rigs, drillships, tankers and offshore support vessels shuttle in and out to service the pre-salt oil discoveries over one hundred miles directly offshore.

Seadrill's have been among those rigs that have come to help energy companies in Brazil drill down to oil deposits deep in the Santos Basin. Today four Seadrill rigs - West Polaris, West Taurus, West Eminence and West Orion - are chartered to operate in the pre-salt region; three of them for Petrobras and the fourth one for ExxonMobil. Antonello's rightfully proud of Seadrill's rapid pace of achievement in the Brazilian market, and the way in which the company has done it. While many operators show up with rigs manned up to 95 percent by foreigners, Seadrill's rigs are all manned by a majority of Brazilians.

A question of people

Eduardo Antonello
Eduardo Antonello, director of Seadrill's operations in Brazil.

The combination of a firm belief in what the Brazilian economy and its people can achieve with Seadrill's famed operational excellence is showing tremendous success here. This bodes well in a market that will probably see 40+ new drilling rig tenders made available over the next 5-10 years. Like any market under tremendous expansion, one of the key factors limiting growth is access to skilled labour. And, as in many other markets around the world, Brazil's government is keen to see its own citizens fill that resource gap. In the short term, this creates scarcity.

"Getting the right people and holding on to them is one of the biggest challenges we have. We face a situation of cannibalism, whereby undifferentiated demand creates a pure bidding war for manpower and everyone snatches the skilled guy from underneath everyone else, and this is not healthy business," says Antonello. Seadrill was not the first drilling rig operator into this market. In fact, it was among the latest to get into Brazil, as major competitors like Transocean, Pride Drilling and Diamond Offshore had been operating there prior to 2008.

"We have the newest fleet of rigs and drillships of our competitors, but that's only a short-term advantage. Other operators will eventually come along with a newer rig, so we can't rely on that to hold on to people," says Antonello. "In order to create a more lasting difference, we are focusing on issues around performance, safety and motivation. Our values-based approach aims to give something above and beyond the salary; it's a matter of mutual appreciation."

Seadrill has also been able to wrangle some of the best contracts from the market, which gives it the financial muscle to complement this management approach. Further, the company has kicked off a number of initiatives to find and keep the most skilled engineers and technicians. "One of our most interesting projects is the STAR trainee programme. Through this programme, we have pre-screened hundreds of skilled engineers and gotten them started in training for Seadrill operations. The final group of 19 candidates has now been narrowed down to just six, who will get fast-track career development," says Antonello.

Seadrill's operations in Brazil have frequently broken symbolic barriers - moves that get noticed by Brazil's government watchdogs. First and foremost, the company hired a Brazilian to lead its business there. Secondly, the company had upped its proportion of Brazilian workers to over 50 per cent within its first year of operations, even if 30 per cent was the requirement. Lastly, the company has stayed ahead of the paperwork curve with extensive planning.

"Without careful and detailed planning, companies may bring a rig to Brazil and stay several months struggling to go through the necessary permits and approvals, as well as the intensive sequence of acceptance tests performed by Petrobras," says Antonello.

Pre-salt logistics

Another intransigent difficulty of Brazil's pre-salt oil fields is logistics. With many of the operations as far as 350 kilometres away from Rio (the field's shore base), it is difficult to ferry people, supplies and spares as quickly and cost-efficiently as at many other offshore theatres. "It's difficult because you have lots of crew changes. Just the business of moving people is huge. Brazilians work 14 days on, 14 days off. Foreigners work 28 on and 28 off. We have Brazilian employees living all over the country. The picture very quickly becomes complex," says Antonello.

Local builds

With the demand for complex offshore tonnage like semi-submersible drilling rigs, drillships and floating production units so high in Brazil, many wonder when and how the domestic shipyards and fabrication yards will be able to supply them. Seadrill Brazil is uniquely positioned to weigh those opportunities.

"We have also looked closely into building rigs in Brazil, evaluating shipyards and the players involved. There has been a tremendous amount of speculation in the shipbuilding industry in Brazil. You have some companies trying to win one rig order to finance construction of an entire yard. We've decided to wait to properly understand how this industry will develop and who will be the serious players to partner with," says Antonello.

The demands and risks to building rigs are high. Seadrill has delivered the largest number of newbuilds since 2000 and with the best ontime and on-budget records, and understands how much it takes to reach these figures. Having a partner with extensive know-how and a solid proven design is strategic for the construction of the yards and respective drilling units. Just getting the appropriate operational and environmental licenses can be time-consuming processes and impact the entire delivery schedule. Qualified labour is also scarce and new yards must have a solid agenda to recruit and train a large quantity of people within a short time-frame, so they can be ready when you first start cutting steel. And there is tremendous pressure around deadlines.

"If none of the competing yards had ever built a DP rig, the purchasing party must understand very well this business to carefully evaluate if they can really deliver their first unit on-time within budgeted figures and with the appropriate building quality; otherwise, the game can become very costly" says Antonello.

So far, the answer is unknown. Antonello expects that one of the big rig builders in Asia, such as Jurong, Hyundai, Daewoo, STX or another may succeed in building a rig in Brazil on the back of a large series. "The complexity and costs of a modern design drillship are very high even in Korea; but I believe we will eventually be able to compete, especially if we manage to reach and train skilled personnel with the right level of commitment to make this a success history.

Nonetheless, Antonello remains bullish on the technological prospects coming out of Brazil: "This is a big country with lots of resources and 200 million people. With the right leadership, you can make it happen here. Brazil is building jets, helicopters and BMW motorcycles 30 per cent cheaper than imports. Things like rigs will come."

Seadrill's Leadership

Today Seadrill's drilling rigs demand the highest day rates of any of their kind operating in Brazil. With high rates, though, come high expectations, and charterers like Petrobras and ExxonMobil have put the pressure on Seadrill to perform. During Seadrill's first year of operation for Petrobras, the company reported uptime of roughly 90 per cent. Maintaining that kind of performance will demand rigorous leadership and commitment from Seadrill's management and employees throughout the company.

"Our performance on the first contract has opened up many new doors to us. The rules we operate under are strict, but no stricter than those we face operating off of Norway. Our ability to capitalize on new opportunities depends on building up the right skills right here in Brazil," says Antonello.

Heavy investment in talent and leadership by Seadrill in Brazil are meant to obtain those skills and keep them. And, with that, the company stands a good chance of succeeding in Brazil during the coming decade.

Seadrill Limited

Seadrill Limited was established 10 May 2005, based in Bermuda with an offshore drilling fleet consisting of three jack-up rigs, two FPSOs, four newly built jack-up rigs and two newly built semi-submersible rigs. That same year Seadrill Limited was listed on the Oslo Stock Exchange (ticker SDRL).

Seadrill is an international offshore drilling contractor providing services within drilling and well services. Together with partners, the company owns 40 drilling units. Seadrill's versatile fleet includes harsh-environment semisubmersibles, jack-ups, shallow and deepwater tender rigs and deepwater drillships. In addition, Seadrill provides platform drilling, well intervention and engineering services.

In January 2006, Seadrill acquired the Norwegian drilling contractor Smedvig, which originated from a long line of shipowning activities dating all the way back to 1915. This combination, under the Seadrill Limited banner is acknowledged as one of the world's fastest growing drilling contractors.

Seadrill´s offshore drilling fleet is considered one of the most modern in the world due to its emphasis on investing in technically demanding

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