June 28, 2016 / 10:56 PM / 3 years ago

Brazil oil research park woos L'Oreal, Inbev as petro-market slips

RIO DE JANEIRO (Reuters) - When U.S. data storage provider EMC Corp opened an oil and gas research center in Rio de Janeiro’s Technology Park in 2014, it failed to anticipate a looming downturn in Brazil’s booming oil industry.

A workers cuts grass in front of a building at the UFRJ Technology Park in Rio de Janeiro, Brazil, June 7, 2016. REUTERS/Pilar Olivares

Today, the park’s main tenant, state-controlled oil company Petrobras, is hemorrhaging money amid slumping oil prices and the site’s administrator, the Federal University of Rio de Janeiro, is trying to diversify.

The energy industry is still a priority “but it’s no longer our exclusive goal,” the park’s executive director José Carlos Pinto said.

The research park sprouted up on university land from 2007 after the discovery of Brazil’s offshore ‘subsalt’ region where giant resources are trapped under a layer of mineral salts far beneath the seabed under a mile and a half of ocean.

Funded by a percentage of Brazilian oil revenues, the park grew in the wake of big offshore discoveries and has received about 2 billion reais ($584 million), most of it for petroleum research.

But funding dwindled in the last two years as oil prices fell and corruption allegations plagued Brazil’s debt-ridden Petrobras .

A more diverse group of tenants are moving in, including cosmetics maker L’Oreal and Ambev SA, the local unit of Anheuser-Busch Inbev SA, the world’s biggest brewer.

Rio de Janeiro’s Fundação Oswaldo Cruz, a leader in research into the Zika virus and one of the world’s top tropical medical institutes, is also in talks to open facilities there.

While the “subsalt” fields south of Rio still beckon, the challenges faced by the park are a stark illustration of how the crude price slump has endangered energy research and exploration in Brazil at a time when the country needs an innovative oil sector to help it overcome its worst recession in decades.

Key tenants at the R&D center - located on an island between shantytowns, highways, Rio’s international airport, a sewage treatment plant and the postcard expanse of the city’s Guanabara Bay - include oil service providers Schlumberger NV, Baker Hughes Inc and Halliburton Co.

It is home to more than 50 companies and independent research labs.


With 90 percent of companies there focused on the oil industry, attracting new businesses is crucial, EMC’s Pinto said.

EMC had tried to reinvent its 3,000 square meter (32,291 square foot) facility almost from the outset, taking on projects for the finance, telecommunications and health industries.

General Electric Co, which spent 500 million Brazilian reais ($150 million) on a sleek multi-focus R&D center can boost attention on its renewable energy, aviation and health care businesses as demand for oil research slumps.

L’Oreal expects to complete a research center to develop hair, skin, body, nail and deodorant products in the first half of 2017.

“For us, it’s always interesting to be surrounded by innovative companies,” L’Oreal said in a statement.

Ambev, Brazil’s dominant brewer, is also well along with construction of its research center that will initially contract about 60 researchers.

Falling oil prices slashed the sliver of Brazilian oil revenue that, by law, companies must direct to research at certified local institutions such as Rio’s Federal University. Between 2014 and 2015, it fell by 26 percent to 1 billion reais ($292 million).

Much of the cash spent went directly to universities and not to the corporate research centers. This resulted in the universities contracting the services of the research centers rather than the other way around, as was intended.

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“Laboratories were built and now you don’t have the demand necessary to maintain them,” said Jose Mauro Ferreira, head of ABESPetro, Brazil’s oil service company association.

Meanwhile, oil and oil service companies have underused labs and scientists at their giant, new buildings.

But despite the troubles the park has achieved some successes. Since 2010, when Schlumberger, the first big tenant, moved in, companies at the park have filed for 56 patents in Brazil, 15 of them last year.

Writing and additional reporting by Jeb Blount; Editing by Christian Plumb and Alistair Bell

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