General Electric Co. and Brazilian energy company Petroleo Brasileiro (Petrobras) have signed the world's largest subsea wellhead production contract, worth nearly $1.1 billion, as GE looks to boost development of the oil and gas sector in Brazil.
The contract, which builds upon an existing partnerships between the two companies, includes the delivery of about 380 subsea wellhead systems and installation tools needed in oil well exploration. More than 75% of the parts will be made in Brazil.
GE Oil & Gas is expanding its operations in Brazil to meet growing demand for oil field equipment and services, especially from state-run energy giant Petrobras. In 2009, the companies signed what was then the biggest contract in history to date, in terms of number of wellheads, worth $250 million. In June, GE said it had completed a $32 million expansion of its service and subsea systems facilities in Macae, Brazil, the primary base of operations for offshore oil production in the country's Campos Basin.
"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," said Joao Geraldo Ferreira, CEO of GE Oil & Gas for Latin America. "We want to grow with the country."
Petrobras plans to install the subsea wellhead systems in oil and gas fields in Brazil. The equipment will be produced at the GE plant in Jandira, where GE has invested $30 million to expand production capacity.
In July, General Electric said it remained on track for double-digit earnings growth this year despite reporting an 18% drop in second-quarter profit. The bellwether U.S. conglomerate is continuing the restructuring of its finance and industrial arms, and will split its energy infrastructure business into three standalone operations.
GE shares were up by 11 cents, to $22.16 in recent trading, while Petrobras' American depositary shares were up by 10 cents, to $29.95. GE's stock is up 12% over the past three months, while Petrobras' stock is up 26% over the same time period.
Copyright (c) 2012 Dow Jones & Company, Inc.
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