Copagaz: Bottled Gas Distributor and Transporter in Brazil

Interview with Ueze Elias Zahran, President of Copagaz and Zahran Group

Could you give us an overview of the gas sector in Brazil nowadays?

Fortunately, I had been working for 21 years to impose the laws here. The same laws that, in Europe, avoid accidents caused by gas leakage on the domestic bottled gas.

I discovered that according to the law, a test on gas bottles has to be carried out every 10 years. The bottles have a limited life span, but here in Brazil they used to be used and reused for 60 years without any kind of tests.

When I was in Madrid on an international gas forum, I went to a bottling company and saw their work. They had 8 employees producing 10,000 tons of bottled gas every month. I had 150 employees that produced only 6,000 tons per month. Everything in that company was fully automated and we didn’t have the resources to automate here.

Based on what I had seen there, I went to the agency and we imposed the law in 1996. We started testing the existing 105 million gas bottles for the first time in 1997 and it took us 13 years to test them all. 25% of the bottles couldn’t be used anymore and had to be destroyed. 25 million new bottles were bought.

Since international laws have been implemented, the number of accidents with gas bottles fell drastically. 40% of the accidents have the consumer as a victim and, prior to the tests, there were accidents occurring every 3 days.

Copagaz is strongly established in the Brazilian economy. How did you reach the actual market share?

We have always been taking care of the product quality instead of aiming for volume. There are 6 companies and Copagaz is the 5th in terms of sales volume. Our sales volume is of 600,000 tons each year and we are gradually increasing it.

Before 1997, there was no law, but we already cared about the quality. The first thing I took care of was the employees, because on average 30% of the employees of a gas company is illiterate and I was able to educate them. First, I paid 70% of the school fees to illiterate employees, but I was unable to achieve literacy. I then brought a teacher into the company: the canteen turned into a classroom from 18:00 onwards, and all those who were illiterate had to participate. This way, I was able to bring knowledge to every single one of them. The company pays 70% of the school fees to whoever wants to continue studying. Many of the employees are now studying logistics, foreign languages, management, etc. We spend BRL 1.7 million each year as a social expenditure.

When travelling in Brazil, I noticed few people had access to IT. I started a school to teach those who weren’t at ease with a computer and today we have 5 free schools. My wife, an intelligent woman, told me I should accept senior citizens. I placed an ad on my TV channel in Mato Grosso and we got a response from 1,200 senior citizens who wanted to learn how to work with a computer.

Which are Copagaz’s challenges when it comes to the finances, growth and partnerships?

In terms of the growth, Copagaz is doing well. I was able to buy a company that produces bottles and they are doing very well. I am transferring the company near NHL, which is the qualifying company of the gas bottles.

We have requalified our bottles and all those that failed the test were destroyed.

We are gradually extending our area of operation to sell for the entire country and today we are already selling in 19 Brazilian states. Our company is very well known and noticed so that wherever we go, there are always people interested in representing us.

As far as investment opportunities are concerned, is there any possibility to create partnerships with South American countries?

There were no partnership requests, but there were many requests to buy my company and I’m not interested in selling it.

Are there investment opportunities for Copagaz and Zharan Group?

Yes, there are some opportunities in television stations. I started with 3 TV stations in Mato Grosso and nowadays I own 7 TV stations and 5 radio stations. We are growing in terms of communication.

As for the gas sector, there is a difficulty resulting from the quality of the product, which is a priority in order to avoid accidents. Gas is very flammable; just by turning the light on a house can explode.

What are your present and future goals?

To grow in the gas, radio and television sectors.

Concerning the diversification you just talked about, is there any possibility for partnerships in communication, for example?

Until now, there are no partnership requests.

At first, I wanted to bring TV Record into Mato Grosso, but I had to place towers in 22 cities just to send the image there. 20 of the mayors agreed, but two of them didn’t. Therefore, I decided not to bring TV Record into Mato Grosso and decided to start my own TV station. There were important people that wanted the 3 channels and everyone thought I was going to lose and wouldn’t get the 3 channels. I struggled very hard to get them and was almost permanently in Rio de Janeiro (from Monday to Friday) to fight to win these channels. I won and it was the first time those important people lost to anyone.

What would be your message for a foreign or national investor that wants to invest in Copagaz?

Any kind of partnership will take away the power that could belong to my daughters or grandchildren in the future. This is why I am still thinking if a partnership would be viable. Right now, all the decisions are in my hands and if I had a partner, I would depend on the partner’s acceptance.

What is your vision for the future?

Copagaz is a good company with more than 50 years of experience in the gas sector. It’s a company that addresses social issues. Copagaz and the TV stations work well, each with their own resources.

I already spoke to the proper authorities and I was right: the gas bottling has to be automated.

We also need to have tanking systems. At the moment, Petrobras has tanking systems but the distributors must also have them. I went to Mexico and their gas distributors have tanking systems that last for 75 days. In Japan, their tanking systems last for 120 days, and here in Brazil our tanking systems last for 2 days. Our gas trucks work during the night to supply our tanks with gas for the following day. It’s a crime to have drivers working during the night with gas trucks! If there is an accident with one of these trucks, it can kill a vast number of people.

Would the tanking systems require an external investment?

It would require both internal and external investment.

I already talked with Petrobras regarding the importance of building a separator in the Central-West Region of Brazil, but so far nothing has been done.

Our gas trucks make around 1.4 million kms per year to transport Bolivian gas into our companies and it’s absurd because we can have a natural gas separator ourselves.

Campo Grande has no connection to the Bolivian gas by road, but it has by railroad, and Santa Maria has high quality roads.

Wouldn’t it be feasible to have a separator built by a foreign investor?

It would be good to have foreign investors investing in Mato Grosso and Mato Grosso do Sul, which is a highly sought state. It’s the biggest soya and cotton producer.

Foreign investment would be very welcome in terms of the construction of the separator and in terms of the tanking system. The tanking system is expensive but it’s very important.

The tanking system is a secure investment. We aren’t going to stop selling 33 million bottles per month, which is the Brazilian consumption. 30% of these gas bottles is sold to the industry.

The tanking systems are very important because there cannot be a gas shortage in Brazil. 95% of the population uses gas to cook their meals every day.

 

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