Engineering in Brazil: Upcoming Joint Venture for KTY Engineering

Interview with Daniel Yamada, President of KTY Engineering

Could you give us an overview of the engineering sector in Brazil and tell us how you think the sector is doing at the moment?

KTY Engineering is mainly focused in the area of chemical process engineering and in the oil and gas sector. Despite the deceleration of investment in recent years, engineering has seen a series of opportunities arise both for this year and for the coming years, the only thing is that these opportunities are dependent on engineering companies adding value to the services that they offer. Obviously competitive costs are very important but not only this, engineering needs to have a very strong participation and responsibility not only in the executive stages of projects but a responsibility and participation in the complete life cycle of a development.

Even though there is a deceleration of investment, we are still seeing plenty of opportunities that involve some challenges to ensure that these investments continue to generate work for us.

With the large project that the government has announced in the oil field sector, how does the engineering sector stand in terms of know-how to meet the demands of the government and of the government´s partners from China? Do you think foreign partners and know-how will come here?

Unfortunately Brazilian engineering specifically regarding the oil and gas sector is restricted to executive engineering despite the fact that I believe Brazilian companies are capable of contributing much more to the other stages of the projects. With the increased presence of Chinese companies we have seen much more competition and costs become a major challenge. The good thing is that this means Brazilian companies are encouraged to improve, to become more competitive, to increase their productivity and to achieve better results.

Could you tell us a bit about KTY Engineering, what is the story behind the company, what areas do you focus in, etc.?

KTY Engineering was founded in 1986 by three ex-employees of a Finnish company called Jaakko Poyry. The K stands for Mr Kuroki the T for Tomas and the Y for Yuzi. Our first client was International Paper, we have worked a lot with them in particular with cellulose based paper. Over these twenty something years we have diversified into new sectors, principally into oil and gas which is one of our main areas of activity.

One of the company´s main objectives is to diversify our work portfolio. An example of this is in the petro-chemical sector, principally with polymers and fertilizers where we are doing a joint venture with Simon Carves, an established English company that has been around for 130 years and which has lots of experience in the petrochemical sector, especially polymers.

What is going to be the name of this joint venture?

It is going to be called Simon Carves Engenharia, 51% of shareholders are going to be from KTY and the remaining 49% are going to be from Simon Carves.

What kind of field will you be working on in this joint venture?

The objective of this joint venture is mainly to work in the petro-chemical sector and later in fertilizers. To be more specific we are going to begin working in the polymer sector. We have seen that there are going to be lots of opportunities coming up in this area in the coming years particularly with the completion of the Comperj refinery in Rio de Janeiro. Therefore we are doing this joint venture with that in mind. Logically we are also intending on working with Simon Carves in the fertilizer sector which will be a very attractive sector in Brazil along with the renewable energy sector.

Now that you are doing this joint venture, what are the main challenges faced by KTY?

The challenges that come as part of this joint venture will be in terms of technology. I think it will be great for Brazilian engineering companies to acquire the know-how for more conceptual and basic engineering. Therefore KTY is going to invest in training and development for our engineers to gain this kind of knowledge.

You also work in the infrastructure sector and with cellulose paper, are there challenges to acquire new partnerships in these areas?

KTY has always had a strong presence in the field of cellulose paper and we have had joint ventures in the past for this sector. For the sectors of infrastructure, offshore and cellulose paper, in the same way that we have done with Simon Carves, KTY continues to look for partnerships that will allow us to add value to engineering projects in these sectors.

What can KTY offer to an investor or potential partner?

The main contribution that KTY can offer is our established presence in the country and in these particular sectors of the market. We see that our current clients are increasingly demanding more complete solutions, a more comprehensive scope of supply and the participation of engineers in the stages prior to implementation. KTY is aware of these demands and opportunities and we want to accept these contracts and projects when we have the structure and the know-how to accommodate them. Thus, we are looking for partners or investors that could offer a joint venture that would mean we could offer a more comprehensive scope of supply.

You have a wide knowledge of the engineering sector here in Brazil. In terms of such partnerships, what would you say are the possibilities here in Brazil and which are the sectors that are experiencing good growth?

Here in Brazil we could do with greater performance in the field of chemical processes. As I said, the oil and gas sector has been doing well for a while now. I would also highlight the fields of fertilizers, petrol and petro-chemicals, and cellulose paper. I consider these areas to be very attractive.

You are now becoming an international company, what is the position of such Brazilian companies on the foreign market?

I see it like this, I think the next few years are going to be when Brazilian engineering companies become more consolidated due to the deceleration of investment and other challenges. I think that Brazilian engineering could offer much more than it currently does offer its clients. Today, a great part of the clients set up in Brazil are global clients yet the Brazilian engineering companies only offer limited solutions and obviously just local solutions. I think that it is time for Brazilian engineering companies to step it up a level and push for the investments in the country.

What is your vision of the future for KTY?

Today, KTY is a consolidated engineering company here in Brazil. My vision for KTY in the future is for it to be a business partner for its clients, and that the company proposes valuable engineering projects that incorporate the complete life cycle of an investment project and not only one phase of a project. It has been well proven with some of the latest developments and large investments here in Brazil that having a worthy engineering company present in all phases of the development means you can have fantastic results or on the other hand if the engineers are not involved in the whole project it can mean disastrous results.

Can you tell us a bit more about what you mean by greater scope of supply? We know that you are strong in the area of implementation, so what else would you like to be doing?

Our vision, challenge and mission is to offer a scope of supply. What do I mean by that? This means acting in the initial phases of the technical and economic viability studies where you decide on the technology that needs to be used, it means working on the processes that are going to be implemented, and in the stages where decisions regarding investment are made, and then obviously we would pass on to the implementation phase, then the operation and maintenance phases and finally the phase of concluding the life cycle of the development. This would mean taking on the entire project from the very initial phase of conception to finalisation.

What would be your message to a foreign investor?

As with the example of Simon Carves, I believe that by joining together know-how and local presence, one can establish a very productive partnership that can be really interesting here in Brazil. Brazil needs to have a better engineering sector than it does the moment. I think that this is a unique opportunity for our company to acquire these partnerships and to be able to take advantage of the opportunities here in Brazil.

Can you tell us a bit more about the projects that you work on and the clients you work with?

Currently, our main projects are focused in the oil and gas sector. Petrobras is now completing most of its investments in its current diesel and petrol portfolio. The objectives of these projects were to reduce the sulphur content both in the diesel and petrol. I don’t know if you have seen it but they have just released a new kind of diesel with lower sulphur content and this is the result of these investments. We have been involved in nearly all of the projects in Petrobras´ diesel and petrol portfolios in nearly all of the refineries in the country. In the last 5 years we have put in more than 5 million man hours just for the Petrobras projects, which is a huge amount.

We have also been involved in a project for the Comperj refinery which is the first unit for HCC, it is going to be a catalytic hydrocracking unit. It is the first such unit not only for Petrobras but for the country as a whole and it was KTY that carried out this project. These are the largest projects that KTY has been participating in over the last 5 years.

You have worked in the field of cellulose paper, can you tell us a bit about that?

We have worked on projects for Klabin and for engineers at International Paper. Our first client was International Paper and they are still our client. We have participated in nearly all of the large investments made by International Paper. We have also worked a lot with some of the largest providers of technology like Voith and Andritz. We have participated in some really good projects in recent years.

What about in terms of infrastructure?

KTY is really interested in the infrastructure sector especially because of the huge developments that are going on at the moment in Brazil. Today, we are participating in projects to do with the metro in São Paulo, but we are not working in the infrastructure sector as much as we would like to be. We would like to be involved in the ports, airports, highways, bridges, civil constructions, etc. KTY is keen to find the right partners to invest in this sector.

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