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Posted on April 9, 2012
By Samantha Pearson in São Paulo
BG Group will invest more than $2bn on research and development in Brazil’s booming oil industry in an attempt to become the country’s biggest foreign producer by 2020, the head of the company’s Brazilian operations told the Financial Times.
Nelson Silva said the FTSE 100 company would make the investments on top of an obligatory national R&D contribution of 1 per cent of gross revenue, helping BG carve out a niche in the market alongside Brazil’s state-run Petrobras.
Brazil’s vast “pre-salt” oil reserves, discovered in 2007 and enough to turn the country into one of the world’s top-five producers, have helped attract more than 30 foreign oil companies to the industry.
However, a severe shortage of skilled workers and technical expertise has emerged as one of the main barriers to production.
BG’s total investments in Brazil before 2020 could be in the “tens of billions”, Mr Silva said, with analysts estimating as much as $42bn, making BG one of the biggest UK-based investors in the country.
“In the 1990s we made a strategic decision to invest in Brazil’s oil industry. Then the discovery of the Lula field, one of the biggest in the world, just made Brazil even more attractive,” said Mr Silva.
The oil and gas producer has already invested about $5bn in Brazil, buying into five offshore blocks off the south-east coast, taking a majority holding in the country’s largest gas distributor, Comgás, and a stake in the gas pipeline to Bolivia.
Mr Silva said the R&D budget of more than $2bn would be spent by 2025, mainly on building a technology centre in Rio de Janeiro and training programmes in Brazilian universities.
Mr Silva said the funds would mainly come from cash generation and project finance, as well as a $5bn global asset sale announced this year.