As Kemira expands into new oil and mining markets, South America is the brightest prospect. Led by powerhouse Brazil, the region is poised for a strong upswing.
"The business in South America has weathered the recession well and exceeded expectations. We’ve seen growth through the recession and there are definitely signs of recovery,” says Randy Owens, President of Kemira’s Oil & Mining segment.
“Over the past 2–3 years, the most important factors for Kemira’s business in South America have been steady growth in the region and development of the local Kemira organization,” says Owens.
In 2008, South America only accounted for about five percent of Kemira’s revenue and workforce. However, both of these figures were up sharply from the year before – and both continued to grow briskly in 2009.
Owens sees strong opportunities for “very aggressive growth”, both in market share and within water-related areas. “Our business in the region is quite evenly split between the Oil & Gas and Mining customer segments, with growth in all areas,” he adds.
An Eldorado of Minerals and metals
The Oil & Mining segment’s strategy in this region, as elsewhere, is based on I3- Intimacy, Innovation and Immediacy. This means being close to customers, successfully bringing new inventions to the market and being poised to react to changing customer needs.
“The main developments in 2010 will be continued strengthening of our position in the region through organic investment, the opening of a new R&D center in Brazil and the addition of sales and applications resources to service customers,” Owens outlines.
After Brazil, the most important market on the continent is Chile, the world’s main copper producer and a major supplier of iodine, lithium, molybdenum and sodium. Colombia is becoming increasingly attractive for business, mostly in the Oil & Gas customer segment. The market also looks promising for the business serving the mining industry, as well as for Kemira’s Municipal & Industrial and Paper segments. In Mexico, Kemira is the leading water treatment chemicals producer.
Overall, South America boasts the planet’s biggest reserves of minerals and metals, representing 15–20 percent of global mining investments.
“Aluminum, gold and polymetals are also big here,” says Sergio Cabo, Vice President of Oil & Mining in Brazil. “Another important one is niobium; Brazil produces 94 percent of the world’s supply. It’s recovered through a new, very complicated process. We’re helping our customers with that.”
Yet another key sector includes white minerals such as kaolin, which accounts for 20–25 percent of Kemira’s Brazilian business.
Owens, meanwhile, points out that both the region’s Oil & Gas and Mining sectors are heavily water-intensive, and becoming more so as resources in mature markets degrade. This dovetails smoothly with Kemira’s water-focused strategy.
“Water use is central to the Oil & Mining industries in South America,” he says. “For example, in Chile and Peru, 70 percent of water resources are consumed by the mining industry.”
Oil drilling produces vast amounts of salt water as a byproduct, while the mining industry uses water as its main means of ore separation. Kemira supplies a range of products to control these processes and make more sustainable use of water resources.
The Pre-Salt Bonanza
Off Brazil’s coast lie some of the world’s largest untapped oil reserves, known as pre-salt because they predate the two-kilometer layer of salt that covers them. The latter, in turn, lies under as much as 5–7 kilometers of water, rock and sediment. The oil itself is in the pores of reservoir rock – altogether posing the greatest challenge for oil drilling ever.
Brazil’s national oil company, Petrobras, opened its first pre-salt well in May 2009.
“This well is not as deep as they will be in future; it’s more of a pilot for collecting information, a lab to develop the technology,” says Sergio Cabo. “There will be great needs for new chemicals when they go into deeper wells. The second one is to open by the end of 2011 and the third one in 2013.”
Petrobras plans to invest heavily to develop this deepwater business in the next three years, with a substantial portion to be spent on chemicals.
“At this point, it’s not very clear what the consumption of chemicals will be,” says Cabo. “We know there will be absolutely different requirements from normal offshore drilling. They’ll be dealing with issues like CO2 and corrosion. It will be very difficult to drill through two kilometers of salt – that’s never been done before.”
A stronger foothold
Kemira, too, has steadily been expanding its footprint in Brazil, with seven production facilities around the country and an R&D center opening this year.
As for the R&D centre in São Paolo, Cabo says: “We aim to be ready by October with 10 people working there by the end of this year and 20 next year.” The focus will be on implementing and developing solutions for oil, mining, water and paper.
“We need local R&D to meet Petrobras’ needs, to capture some of this huge growth,” he says. “The oil and gas market is expected to increase by 50 percent over the next 3–4 years here to a market potential of EUR 150 billion a year. If we can get a quarter or a third of that market, it will be quite significant.”
Read the full article in Kemira’s stakeholder magazine WaterLink 1/2010