3. nOTES
1. ENSEADA project is still under construction, making the disposal of bibliography
very limited. This project was only possible thanks to the patience and help of
José Ernesto Campos Gonzalez, compliance manager of the ENSEADA project.
(referenced in this Analysis as (ENSEADA 2015))
2. This Analysis presents information and suggestions about the ENSEADA, which
are result of a Project Stakeholder Analysis; an Implementation Analysis and a
Risk Analysis.
Sébastien Giancola
5. ENSEADA Project Analysis
EXECUTIVE SUMMARY
The desire in expanding oil drilling in Brazil is clear. After several years of
research, Petrobras - state-owned oil company - has found a considerable
amount of good quality oil in the Pre-salt layer. This requires more equipments in
both quantity and quality.
This demand created an interesting opportunity, which was taken by four private
companies (3 Brazilians and 1 Japanese). Together they form the ENSEADA
group which is now constructing a new and modern shipyard, in order to be
attending the already ordered 6 drillships.
The ENSEADA Project has colossal dimensions and costs. It is the biggest private
investment from the last 10 years in Bahia state and also the biggest investment
of Brazilian History in the Naval industry. With the conclusion of this Project, both
the local and Brazilian economy will experience a grow in quality and worldwide
respect in the naval and oil drilling sector.
Big projects means big problems and, unfortunately ESEADA Project is not an
exception. The Project is suppose to be concluded in December 2015, however it
is struggling in following the timeline.
This Analysis aims in explaining what are those challenges that ENSEADA is
facing and others that will possibly face later. Some recommendations are also
offered, in order to transform ENSEADA Project in a more effective and efficient
Project as it already is. The approach used was the analysis of the Project
Stakeholders, Implementation and Risks.
5
6. ENSEADA Project Analysis
1. INTRODUCTION
Since 2006, Brazilian government – through the expertise of the state-owned oil
company, Petrobras – is successfully investing in drilling oil in deep water. In geology,
deep-water term refers to the Pre-salt layer. According to Petrobras researches, the
Pre-salt layer can mean reserves of over 50 billion barrels of oil, four times greater the
volume of the current Brazilian reserves. The oil found the deep water region is
considered of good quality. However, to access to this depths, it requires a highly
advances technology and, consequently, a large-scale investment. (PETROBRAS, 2008)
The economical opportunities from the Pre-salt oil are extremely attractive, putting
Brazil into a strategic position regarding high demand for energy worldwide. For this
reason, Brazilian government is investing massively in more efficient and effective
technology of drilling oil. So far, this investment has been successful and the annual
average of daily production Pre-salt oil has grown
almost 12 times. (PETROBRAS, 2014)
This automatically requires new and more advanced
technology and equipments. For this reason, the Brazilian
government approved a colossal private project of a
new and modern shipyard.
The reason of the construction a new shipyard, is due to
the necessity of Petrobras of others and more advanced
drillships.
The shipbuilding industry is dominated by Asiatic economies – such as Japan, Korea
and China. However, in the mid-twentieth century, Brazil experienced an expansion on
its economy; all sectors were developing and receiving incentives. These incentives
enabled Brazil to meet in the 70’s the condition of second world park shipbuilding.
(LIMA & de VELASCO)
Unlike the Asiatic producers, Brazil does not export ships. This means that the excellent
position that Brazil occupied in the 70’s and is still nowadays, is due to the impressive
national demand. This shows the importance and need in having a modern shipyard.
(LIMA & de VELASCO)
6
7. ENSEADA Project Analysis
2. ENSEADA projecT
This is exactly the reason for construction of the ENSEADA shipyard. The project,
called Estaleiro ENSEADA do Paraguaçu (EEP), is the result of almost 5 years of
negotiation. Brazilian states were trying to find the best arguments to have the privilege
of being part of this national programme of naval revitalization. EEP and four others
shipyard will be constructed to attend the demand of 29 drillships. (ENSEADA 2015)
EEP is located in Bahia state, at the mouth of the Paraguaçu river, located on the Baìa
de Todos os Santos, a bay that offers natural protection from the
storms, or any other natural risk and deep waters for big size of
ships.
The EEP project started in 2012, with the expectation of conclusion
is in 2015.
Few figures about Estaleiro ENSEADA do Paraguaçu (ENSEADA 2015):
• The Project has an area of 1.6 million m2, with approximately 400 million m2;
• When fully operating, EEP will be processing 140 thousand tonnes of iron each
year and make ships of 400 thousand tonnes;
• Its budget is 3.2 billion reais (roughly 1 billion euros). It is the biggest private
investment in Bahia state and the biggest in the Brazilian Navy Industry;
• The State Government will be supporting the Project by constructing an
adequate infrastructure and helping the private investor to obtain the credits,
which are provided by the Brazilian Federal Government.
• It has already an order of U$6.4 billion, or €5.9 billion; and
• When fully installed, the shipyard will have the potential to employ directly 8
thousand people and 14 thousand indirectly.
EEP is a prosperous project, however it deserves further analysis. This project aims to
present a brief Stakeholder Analysis, Implementation Analysis and Risk Analysis and to
provide suggestions and comments on each of them.
7
8. ENSEADA Project Analysis
3. STAKEHOLDER ANALYSIS
PMBOK defines stakeholder as “an individual, group or organization who may affect,
be affected by, or perceive itself to be affected by a decision, activity or outcome of
the project”. (PMI, 2013)
It is possible to separate the stakeholders of the EEP project as internal and external
(see charts below).
Some of them presents
more influence in the
Project than others:
Internal Stakeholders:
o ENSEADA;
o Odebrecht;
o OAS;
o UTC;
o Kawasaki; and
o Shareholders
External Stakeholders:
o National Government;
o Bahia Government; and
o Petrobras.
ENSEADA is a composition of three private companies: Odebrecht, OAS and UTC
which own 70% and Kawasaki owns the other 30% of ENSEADA and, consequently
the four companies are the most influencer stakeholders. (ENSEADA 2015)
o ODEBRECHT: operates in the sectors of infrastructure, construction,
petrochemical, chemical, power, mining, sugar and alcohol;
o OAS: has national and international presence, standing out for major
projects in infrastructure sectors, energy, oil and gas, sanitation and
transportation;
o UTC: is an active company active in the offshore area, participates in
all stages of construction of offshore platforms.
8
9. ENSEADA Project Analysis
o KAWASAKI: in addition to manufacturing ships, it is world renowned
for its motorcycles, trains, airplanes, industrial plants, robots for industrial
and aerospace equipment.
Odebrecht, OAS and UTC are
Brazilian construction companies and
responsible for the construction of the
majority of the EEP project. Kawasaki
is a Japanese company with a long
expertise in shipyards technology.
Together, they create a complete
team, in order to provide an excellent
quality of service and product. The
final product will be a last generation
of shipyard fully automated with
Kawasaki technology.
The partnership with Kawasaki is
extremely interesting for the EEP, as
well as for the Brazilian economy. It
brings a long and well respected
expertise in the related technology. So
far, it has been an investment of $ 85
million in Japan's technology
transferred to Brazil. (ENSEADA 2015)
The relationship between the
companies that form ENSEADA is
considered positive, with a direct
contact and exchange of information
between them.
ENSEADA is considered the Decision
Maker of the EEP project,
because any decision taken by
ENSEADA will be influencing the
Project as a whole. The group is the
one which is constructing, but also the
one paying.
On the hand, the other 4 companies
(Odebrecht, OAS, UTC and Kawasaki)
– which compose ENSEADA – are
considered Influencers. This can be
justified by any action or decision
taken, it will influence the Decision
Maker, but also the other stakeholders.
The State (Bahia) Government has a
role of Influencer within the EEP
Project. The influence of the State
Government was vital to make it
happen in Bahia. They were
responsible for the 5 years negotiation.
Now their influence is in making the
project to obtain loan from the
National Government. They also
support the by constructing an
adequate infrastructure – mainly
creating new roads or paving the
existing ones. (ENSEADA 2015)
The National (Brazilian) Government
was key before the project proposal
acceptance. They were the one who
accepted this colossal investment. Of
9
10. ENSEADA Project Analysis
course, the Government saw the
opportunity to develop its Naval
industry, as well as the chance to
develop Petrobras, which is a oil state-
own company. Now the National
Government is considered Consenter
within EEP Project. If the Government
decide, they can veto the Project as a
whole. However, it certainly will not
happen due to the economical
opportunities related to this Project.
The National Government is however
responsible for the funds of this
project. It is a private project, but the
Brazilian government is providing the
majority of the funds, as a loan.
(ENSEADA 2015)
Petrobras has an important role with
EEP Project: they are the Players.
They are indirectly contributing to this
project. Without Petrobras, it is
possible to affirm that EEP will not
have reason to exist. It is due to the
strong necessity of new and modern
drillships that the Brazilian Government
decided to accept this giant project.
Petrobras has ordered 6 drillships, for
the future EEP,with a total value of
$4.8 billion. Beside the construction of
new ships, they will also require yards
to fix and control the existing fleet.
(ENSEADA 2015)
3.1. Polemic with the Brazilian Companies.
As the definition of stakeholder shows, a stakeholder can influence or be influenced
direct or indirectly by the project. It is exactly what is happening at the moment with
EEP. Recently, the three Brazilian construction companies and Petrobras are involved
with a massive corruption case in Brazil, called Operation “Lava Jato”. This is directly
affecting directly the trust and confidence of the others stakeholders.
The Brazilian Federal Police, responsible organ of the investigation, which started 17th
March 2014, is investigating a money-laundering scheme suspected to move more
than 10 billion reais (approximately €3.5 billion).
10
11. ENSEADA Project Analysis
For being owned mainly by the state, Petrobras receives an important amount of
capital from the State, in order to keep developing new projects – such as EEP in
order to be drilling oil from Pre-salt layer. And to develop those projects, Petrobras
requires the support of construction companies, because it does not possess the
technology and equipment necessary for, for example build a building, a road or a
new port. That is why construction private companies offer their services. However,
taking the historical of those companies, the same names are frequently appearing:
Odebrecht, OAS, UTC, among others.
Because of this historical connexion, the 3 construction companies are under
investigation. This affected directly the EEP project, because the National
Government stopped providing funds. The Project is now suffering several
consequences, which will be approached in the next session.
11
12. ENSEADA Project Analysis
4. IMP LEMENTATION ANALYSIS
The EEP project started with the
negotiation in being the Brazilian state
chosen among the others. It was five
years negotiating and providing the best
arguments to make it happen. This stage
can be considered the first one.
(ENSEADA 2015)
The next stage was to find funds to make
this giant project happen. The National
(Brazilian) Government approved the
project and created a fund especially for
this it: the Fund Merchant Marine – FMM
– (Fundo de Marinha Mercante). The
FMM is divided in two parts – one
corresponding to 1 billion reais (around
270 million euros) and another of 600
million reais (around 160 million euros).
The first part has been successfully
released, however the second one not
yet. (ENSEADA 2015)
The construction of the shipyard started
April 2012, with firstly the removal of the
vegetation. Part of this process was also
the delimitation of the construction area
to the preserved one. During the process
of the vegetation subtraction, the local
fauna and flora were successfully moved
to the preserved area. After this, it was
the stage of earthwork, in order to let the
area ready for the construction of the
structure. (ENSEADA 2015)
The first construction phase of the
shipyard infrastructure consisted on the
stake spiking, with the function to offer
stability by transmitting the weight of the
construction to the ground and more
resistant parts. Following the digging,
frame and concrete. This created a
strong and stable base to support the
rest. The second phase, consisted of the
superstructure, by assembling of
premolded blocks, frame and concrete in
situ. (ENSEADA 2015)
Those two phases were successfully
installed due to the commitment of 320
workers and an effective and well
structure plan. The result: the first parte of
the shipyard – called Cais I (Pier I) – was
delivered 20 days in advance.
(ENSEADA 2015)
The conclusion of this first part brought a
new scenario for the Project: the ability to
receive ships. This allowed ships coming
with material and equipment, reducing
costs and time with transportation.
12
13. ENSEADA Project Analysis
Only nine months after the start of the constructions, the first ship docked – more
precisely on 22 of February. The ship was coming from Korea, bringing another vital
piece for this project: a colossal crane (called Goliath) with the capacity to carry 1.800
tonnes. In parallel to the construction, thousand of people were receiving courses, in
order to be able to work at the present stage of construction of the Project or to be
working after it will be completed. An enormous technological transfer between Brazil
and Japan is also being developed, result of the partnership between ENSEADA and
Kawasaki. It involves staff training, provision of technical expertise, management
software and technical assistance to professionals in Brazil, and 80 professionals have
been trained in Japan for a total of 102. (ENSEADA 2015)
The planning and the implementation of EEP is realistic, insuring the possibility in
delivering each step on time, cost and quality. However, the Project is now inert due to
the corruption scandal involving 3 of the main EEP’s stakeholders/shareholders –
Odebrecht, OAS, UTC.
Due to the investigation process, the National Government decided to not release the
second part of the FMM, affecting directly the progress of the project. (See Chart next
page).
It is clear how the funds suspension is badly influencing in the progress of the
implementation stages. The EEP project is now paralyzed in 81% of progress, as it
13
14. ENSEADA Project Analysis
should be 94%. This is affecting also affecting negatively the rest of the stakeholders:
delay, extra costs, and unemployment, among others. (ENSEADA 2015)
14
15. ENSEADA Project Analysis
5. RISK ANALYSIS
According to Chapman et al. (2001), risk relates to “an uncertain event or set of
circumstances that, should it occur, will have an effect on the achievement of the
projects’ objectives”. No amount of planning can perfectly alleviate risk or completely
control unanticipated circumstances (Larson et.al, 2014).
As it possible to understand from those affirmation, a risk has always a consequence to
the whole project.
Unfortunately, the ENSEADA managers did not take properly all the possible risks into
consideration. The project stopped in 81% for not having considered a risk related to its
shareholders. It could be considered a risk with likelihood of occurrence, but this a high
severity of impact within the whole project. By identifying this risk, many solutions could
be offered to mitigate or even avoid the occurrence of it. Solutions like:
• A full transparency among the shareholders;
• An appropriate and ethical behiavour from all of them; and
• Potential substitute shareholder.
The following table lists the main risks of EEP project:
15
Potential Risck Detected Decription of the Risk Likehood of Occurrence Severity of the Impact Attitude/Action/Solution
Exchange Rate
Risk
- The oscillation of the
Dollar price can affect
the project. High Dollar
rate, high price of
equipments.
High
(4)
High
(4)
- Avoid buying when the
Dollar is high;
- Take advantage of a
low rate - buying
equipment in advance;
- Search similar supplier
in other currencies.
Political Risk
- Dependence on the
National Government;
- Minimum of local
workforce;
Low
(2)
Very High
(5)
- Attend to the
Government demand;
- Pay local and National
taxes.
Operational Risk
- Asiatic Competition
- Low Profit Margin.
Medium
(3)
Medium
(3)
- Keep improving the
quality of equipment
and the workforce.
- Partnership a company
with strong expertise.
16. ENSEADA Project Analysis
16
Financial Risk
- High Expenses;
- High dependence on
the National funds
(Credits)
High
(4)
High
(4)
- Diversify the source of
funds;
- Prepare an extra budget
in case of interruption
of National funds
Occurence of
Precipitation
- Decelerate the progress
of the Project;
- Can damage the roads
and construction
equipment.
Medium
(3)
Medium
(3)
- Follow the rain forecast
and prepare the
equipment for it;
- Reinforce the roads.
Lack of Qualified
Workforce
- Local population
unprepared (majority
were fishers).
Very High
(5)
Low
(2)
- Provide intensives
courses, workshops and
others activities with the
objective to form the
population.
Possibility of a
Worker Strike
- Risk of disagreement
with Unions.
Low
(2)
High
(4)
- Keep informed the
workforce;
- Provide decent work
conditions.
Bureaucracy
- Delay in getting
information from the
Government;
- Delay in getting
governmental actions.
Medium
(3)
Medium
(3)
- Strengthen the
relationship with the
Government.
- Provide regular reports
to show the impact of
the delays on the
Project.
Bankruptancy
- Possibility in the Funds
(Credits) being
cancelled;
- Withdrawing of the
main stakeholders.
Low
(2)
Very High
(5)
- Strengthen the
relationship with the
stakeholders, especially
the shareholders.
- Find other source of
fundings.
Environmental
Risk
- Fragil flora and fauna;
Low
(2)
Medium
(3)
- Implement a strong
action plan to avoid any
environmental disaster;
- Prepare the workers to
mitigate the risk in an
eventual environmental
disaster.
Risk involving the
Sharehlders
- Only few shareholders, if
any type of issue happen
with them (financial, legal
or internal), it will
compromise the Project.
Low
(2)
High
(4)
- Full transparency
among the
shareholders;
- Ethical behavior from all
of them;
- Possible substitute
shareholder.
17. ENSEADA Project Analysis
5. 1. Exchange Rate Risk
This risk is related with the oscillation of the Dollar. As the price increases, automatically
it will increase the project expenses, as all the main equipment is imported and
negotiated in Dollars. This is a risk with a high likelihood and also with high severity to
the project as a whole.
This is the current scenario; the dollar is more expensive comparing to the previous year.
In August 2014, 1 dollar was quoted in 2.26 reais, while one year after it is quoted in 3.34
reais. (Yahoo Finance 2015).
Unfortunately, there is nothing to do against it, as it is influenced by the global offer and
demand. However, the best attitude to mitigate this risk is by carefully follow the price
of the Dollar and when it is only increasing during a certain amount of time, purchase all
the equipment necessary for a long period and, of course, avoid purchasing equipment
when the Dollar is high. Another possible solution would be to search for similar suppliers
that do not trade in Dollars.
In the other hand, this high risk can be transformed as an opportunity. This can occur if
the value of the Dollar decreases, making the material and equipment also cheaper.
5. 2. Political Risk
This risk has a low likelihood to happen, however a high severity of impact. This is
explained by the role of the Government in project: a Concenter.
This Project only exists because of the demand of drillships from Petrobras – a state-
owned company. This means that the Government has an (in)direct connexion with the
Project. The Government settle few requirements in this Project before accepting it.
One of the requirements was naturally paying the taxes, which has been made since the
start. The other requirement from the Government was to the construction phase and
also it will be done, a certain percentage of the local workforce. (ENSEADA 2015)
This risk can be avoided by accepting Government’s conditions and by applying them.
At the moment, several action have been taken to attend them:
• When fully operating (before the interruption of the funds), 87%
(7.200 workers) of the workforce was from the region. (ENSEADA
2015)
17
18. ENSEADA Project Analysis
• Creation of several courses; and
• Payment of taxes.
5. 3. Operational Risk
This risk is considered medium in likelihood and presents also a medium severity on the
impact. However, it is an important risk to consider, because it involves the financial
results of the whole Project. This risk is also related with the high expenses and a
considered low profit margin. Any wrong step and the whole Project will not be able to
present immediate return on investment.
This ambitious project needs to have clear proves that it is profitable, especially for
being in a sector of low expertise in Brazil. It is a project that aims to compete with
traditional and strong market, which are economies such as Japan or Korean. The good
response from the managers was to create a partnership with the Japanese company
Kawasaki, which possess a term-term expertise in the high technology equipment of
shipyards. Although intensive technology exchange between Brazil and Japan, the
Brazilian workforce is still starting in this sector.
This partnership mitigates the risk, because the competition will be also always present.
Despite this “medium” risk, the implementation phase has shown that the workforce has
been successful so far, in the operational issue.
5. 4. Financial Risk
This is a high risk in both likelihood of occurrence and the severity of impact. EEP is an
extremely expansive project – the biggest in the last 10 years in Bahia state and the
biggest in Brazilian Naval industry. It is a risk considered high due to the dependence of
its creditors: Brazilian Government.
Only the Brazilian Government is providing the funds (through the FMM), which makes
the Project extremely dependent to it. Another important creditor is Petrobras, which
ordered 6 drillships and is paying for it.
The high dependence on only 2 major funders makes the financial risk considerably high.
The solution to mitigate this risk is by diversifying the source of capital, for example
private loans or participation of more private companies. Another solution would be to
ENSEADA prepare an extra budget in case of any issue from its main funders.
18
19. ENSEADA Project Analysis
CONCLUSION
The economical growth of Brazil, especially in the oil sector, allowed the country to
think bigger. With that, was approved a colossal project, the Estaleiro ENSEADA do
Paraguaçu, or EEP. This project represents the biggest private investment in Bahia
state and also the biggest Brazilian investment in the naval industry. It is located a
strategic place, taking the advantages that the Bay of Todos os Santos offers:
natural protection and deep water. Four companies have taken the Project, each one
extremely strong in their sector – from construction to specialized oil engineer
equipment. Those same four companies are also the main shareholders, approved
and funded by the Brazilian Government. The construction of the project started April
2012 and all the stages present on the Project planning were successfully
implemented.
EEP Project is supposes to be 96% concluded by August 2015 and completed by
December 2015. However the project is since few months in 81%. This is due to the
involvement of the main stakeholders (Odebrecht, OAS, UTC and Petrobras) with a
corruption scandal, which affected the trust of the Brazilian Government, the main
funder of this giant project.
This could be avoided if a rigorous Risk Analysis had been made, by take in
consideration the legitimacy of all the shareholders. By detecting this risk, it could
possible to see its likelihood of occurrence and its severity of impact on the whole
Project. The detection of this risk would also allow the creation of action plan in order
to mitigate this risk or even avoid it.
The scenario that ENSEADA is now facing shows the importance of each area of
project management. Any mistake or any forgotten aspect can provoke severe
consequences and, sometimes irreparable.
The next stage now for ENSEADA is to mitigate the effects of this funds recession, by
making resource-allocation decisions (Bodley-Scott S. and Brache A. P., 2009), which
has been made, according to the ENSEADA compliance manager. They are finding
other source of capital in order to maintain the progress made so far and, if possible,
continue with some minor constructions.
This has been an important learning to ENSEADA and any project manager.
19
20. ENSEADA Project Analysis
Even if the project looks perfect, all the stages of a project management –
Stakeholder Analysis; Risk Analysis; Implementation Analysis, etc. – need to be
carefully prepared and rigorously followed.
20
21. ENSEADA Project Analysis
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