Petrobras occupies the hot seat...again


When explosions last month crippled Brazil’s giant P-36 offshore oil platform and killed 11 workers, experts immediately feared an environmental calamity. The world’s largest floating platform, P-36 typically drew 80,000 barrels of crude every day from its six ocean-bottom wells 75 miles (120 kms) off Rio de Janeiro state. Had the wells been left open, huge amounts of oil could have flowed directly into the sea.

But workers managed to shut down the wells after the first blasts occurred. So when the platform sank five days later, the quantity of oil released was far smaller than feared—8,200 barrels of stored diesel fuel and 1,200 barrels of crude from flexible tubing linking the platform to its wells. Cleanup crews removed some of the slick, and currents drew the rest farther out to sea.

Still, lives were lost—and the environmental toll could have been staggering. What’s more, the P-36 disaster was part of a string of high-profile accidents for Petrobras, Brazil’s state-owned oil company, raising fears of more to come. As if to underscore these concerns, an oil spill occurred April 12 at another Petrobras platform. (See box.)

Not surprisingly, Petrobras has been taking serious heat. At congressional hearings and press conferences, batteries of environmentalists, labor leaders, and engineering and safety specialists have accused Petrobras of pushing too fast for production gains, cutting costs by relying excessively on outsourced labor, failing to prioritize worker training, and choosing dubious rig designs and unreliable contractors to carry them out.

In the process, the company has been portrayed as recklessly risking the lives of workers and the health of the environment.

“A series of factors, from questionable Petrobras outsourcing and contracting practices and poor worker safety and training programs to its push to boost oil output, all likely contributed to the series of accidents Petrobras has racked up in recent years,” says Roberto Kishinami, the head of Greenpeace in Brazil. “And the more the company continues to accelerate offshore, mainly deepwater oil production, the greater the danger these high-risk operations pose to oil workers and the environment.”

Petrobras President Henri Philippe Reichstul rejects such criticism, pointing out that after a large oil spill last year in Guanabara Bay, the company drafted a three-year, $1 billion safety program to avoid future refinery and platform accidents.

“After the Guanabara Bay accident we discovered that the company wasn’t investing enough in worker security and environmental safeguards,” Reichstul said this month. “But our $1 billion safety-program investment, one which involves state-of-the-art equipment, refutes the accusation that our company, in the name of accelerating oil production, is not worrying about environmental and worker-safety questions.” (See “Petrobras speeds safety plans after second spill”—EcoAméricas, Aug. ’00.)

Yet such assurances have been undermined by the fact that Petrobras has been experiencing one disaster after another, each one seemingly worst than the last. Capturing the mood, Brazil’s O Globo newspaper this month ran a front-page cartoon showing Reichstul crying tears of oil.

Petrobras has expanded production at double-digit rates since Reichstul took office in 1999. It did so in part by using technologies it developed in the early 1990s to drill wells at record ocean depths. At one of these ultra-deepwater fields in the offshore Campos Basin, P-36 was extracting its crude from wellheads 4,430 feet (1,350 meters) below the ocean’s surface.

Reichstul announced in February that Petrobras would invest $29.4 billion over five years, most of it to boost oil output to 1.9 million barrels a day by 2005 from last year’s daily production of 1.27 million barrels. This would draw Brazil close to its goal of reaching oil self-sufficiency, which experts estimate would require domestic output of 2.1 billion barrels a day in 2005. Petrobras says that even with the loss of P-36, production this year will rise to 1.34 million barrels daily thanks in part to the start-up of a new offshore platform this June.

Though recent accidents have called the production push into question, the oil company isn’t alone in pressing for more domestic output. Brazil’s government has a significant economic stake in the effort. Petrobras’ record $5.52 billion net profit last year—474% higher than its 1999 profit, thanks mainly to higher world oil prices—accounted for more than a quarter of the government’s 2000 budget surplus. Meanwhile, last year’s 13% increase in domestic production allowed Brazil to cut oil imports, which in turn helped hold down the country’s trade deficit.

Critics suggest that government pressure for ever-higher production might explain why a Petrobras manager in charge of oil extraction in the Campos Basin did not order the P-36 rig shut down even though he was alerted to a gas build-up on the platform three days before the March 15 explosions. Online operational bulletins sent from the rig on each of the three days before the blasts stated that to solve the problem causing the gas build-up, a procedure that required importing a replacement part, “production needs to be shut down.”

Appearing before the Brazilian Senate, Reichstul defended the manager’s decision to keep the P-36 platform running. He said rig personnel believed they had found a temporary but safe solution to the gas build-up, adding that this is why he wasn’t notified of the problem until after the accident had occurred.

But Mauricio Rubem, head director of the Oil Workers Federation (FUP), which represents all 19 of Brazil’s oil workers’ unions, told the Senate that production on P-36 probably wasn’t stopped because “it’s difficult for a Petrobras manager to make a decision that will affect the trade balance.”

In a subsequent interview with EcoAméricas, Rubem said: “Any Petrobras manager would have a hard time temporarily shutting down a rig that represented 6% of Brazil’s oil production, especially when he knew that boosting oil output was the company’s No.1 priority.”

FUP also asserts that Petrobras has invested little in worker safety and training. Instead, the organization charges, the oil company attempts to save money by using less-skilled outsourced labor, especially for maintenance and high-risk operations.

The federation claims 67 of the 93 oil workers who have died in accidents at Petrobras facilities over past three years—most of them on offshore rigs—were outsourced labor. Petrobras says it has no break-down showing the employment status of workers who have died. José Lima, Petrobras’ manager of human resources, acknowledges that for every one of the company’s 33,000 employees there are 1.2 outsourced workers. But he argues that the outsourced labor—some 39,600 workers, using the above ratio—often is better prepared than in-house workers for certain tasks.

“We don’t outsource just to reduce costs, but to get a better job done,” Lima says. “Besides, outsourcing is common in the oil industry worldwide due to its high degree of specialization.”

But Fernando Siqueira, president of the Petrobras’ engineers’ association (Aepet), a grouping of white collar employees at the company, says that in the United States, “oil-sector outsourcing is done by companies which are more serious and professional than they are here. That makes Petrobras’ doing oil-sector outsourcing here a far riskier proposition.”

Siqueira of Aepet and FUP’s Rubem also point out that in the years just before Reichstul joined Petrobras, the oil company awarded 80% of all its drill- and production-rig contracts to Marítima Petroleo e Engenharia, a Rio de Janeiro contractor. Petrobras ultimately took the company to court for failing to complete four of its drilling rigs on time.

Marítima got the awards because the government ordered state-owned firms to give contracts to the lowest bidders that met technical requirements, and Marítima was almost always the lowest bidder. But because it received so many contracts, Marítima had financing problems, delivery delays and cost overruns. It delivered the P-36 three months late and $150 million over budget, for instance, pushing the platform’s cost to $500 million.

“Petrobras, in giving Marítima too many contracts, put too many eggs in one basket,” Siqueira says. “As a result, it was left not getting its Marítima-contracted production and drilling rigs, including the P-36, on time.”

Marítima President German Efromovich says his company got the contacts because “we bid low based on less overhead and less of an appetite for profit than our competitors.”

Some critics suggest that such pressure may have led to errors in the fabrication of the platform—and a less-than-thorough inspection of the structure before it went to sea. Others, however, believe Petrobras’ design of the platform was to blame not the execution of that design by Marítima’s subcontractors.

Segen Estefen, who heads Rio de Janeiro-based Coppe, the largest engineering-research institute in Latin America, told the Senate that based on information he got from Petrobras technicians, a gas buildup in the rig detected three days before the explosion most likely occurred in an oil-residue tank located in one of four support towers damaged by the explosion. He said such tanks are normally not located in airtight places like support towers.

Estefen added that ventilation tubes connected compartments in the rig’s pontoons, a design error that could have allowed water into the entire pontoon. “Petrobras is a world leader in deepwater drilling and production technology, and its rigs are certified by reputable rig-classification companies,” Estefen said. “But that doesn’t mean it can’t make design errors, errors which I believe were made and not spotted by certifiers, and which I believe could have led to the sinking of P-36.”

Petrobras Services Director Antônio Menezes rejects the charge, saying: “The P-36 rig was well-designed, certified, seaworthy and safe. Period.”

Inquiries now underway presumably will test that assumption. Norway’s Det Norske Veritas, the world’s largest marine-safety certification firm, is conducting a review. And Petrobras has created its own seven-member committee to pinpoint the cause of the blasts.

Some critics suggest Petrobras may not be sorry that much of the most important evidence lies on the ocean floor.

“I wonder if Petrobras isn’t secretly relieved the rig sank,” says a Petrobras oil worker who asked he not be quoted by name. “After all, it was fully insured, and now no one will ever know who’s to blame for the disaster.”

But Reichstul promises a dogged investigation: “The committee will do everything it possibly can, and then some, to discover what caused the accident so that if guilty parties exist, they can be punished and…another such accident [can be prevented] from occurring in the future.”

- Michael Kepp

German Efromovich
Rio de Janeiro, Brazil
Tel: +(55 21) 544-4044
Serge Estefen
Rio de Janeiro, Brazil
Tel: +(55 21) 562-7021
Roberto Kishinami
Executive Director
Greenpeace in Brazil
São Paulo, Brazil
Tel: +(55 11) 3066-1167
José Lima
Human Resources Manager
Tel: +(55 21) 534-1800
António Menezes
Petrobras Services
Tel: +(55 21) 534-2000
Henri Philippe Reichstul
Rio de Janeiro, Brazil
Tel: +(55 21) 534-1000
Mauricio Rubem
Oil Workers Federation
Rio de Janeiro, Brazil
Tel: +(55 21) 3852-5002
Fax: +(55 21) 3852-5002
Fernando Siqueira
Petrobras Engineers’ Assn.
Tel: +(55 21) 533-1110
Irani Varella
Executive Manager
Petrobras Security, Environment and Health
Tel: +(55 21) 534-1830