(GE) General Electric Wellstream Wins New Contract

General Electric (GE) Oil & Gas’ Wellstream business has been awarded a long-term contract by Petróleo Brasileiro S.A., aka Petrobras (PBR), one of the largest companies in Latin America.

The contract, initially valued at more than $200 million, pertains to flexible pipe and subsea equipment logistics services. The project is expected to be operational by the third quarter of 2012.

In December 2010, GE had acquired Wellstream, the UK-based oil and gas services group for £800 million as part of its aggressive expansion strategy in the energy sector.

In order to execute the contract, GE will assemble dedicated 55,000 sq. meter flexible pipe and subsea equipment at the Wellstream’s logistics base in Niteroi, which is considered to be the commercial hub that is located approximately 14 kms from the city of Rio de Janeiro. GE plans to invest $90 million in the project.

The new logistics base thus constructed will be used by Petrobras to shore up its development of pre-salt oil and gas field projects in the Campos and Santos basins, offshore from Brazil.

Management at GE is positive about the new contract and expects it to help the company increase penetration in this emerging market.

However, investments in the region may be expected to continue. It is estimated that somewhere close to 500 new positions will be required to build up the local skill or expertise. In addition to this new contract, GE plans to spend $100 million on a Global Research Center in Rio de Janeiro in 2012.

The new Logistics Base is advantageously positioned near a number of key Petrobras components and services suppliers and at the same time is also near to GE-Wellstream’s existing Niterói manufacturing facility which supplies Petrobras and other operators in Brazil with high-quality, flexible risers and flow-line products for oil and gas transportation from the subsea.

According to GE, the new base is expected to feature state of the art loading and handling equipment, including: capacity to store 140 reels, to handle loaded reels with 300 tonnes, and to berth installation and commercial vessels simultaneously with 8.5 meters draft and 220 meters in length. The project will create approximately 250 direct jobs and 250 indirect jobs by the start of its operation.

General Electric Company is a global infrastructure, finance and media company.  With products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content and industrial products, it serves customers in more than 100 countries and employs more than 300,000 people worldwide.

GE currently holds a Zacks #3 Rank, which implies short-term Hold rating.

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