OPV’s in Latin America

The market for offshore patrol vessels in Latin America continues to grow and could become very lucrative over the coming years. Andrew Elwell examines some of the challenges in penetrating this market and exploiting the opportunities available in the region.

Is Latin America’s naval market riding a wave?

By Andrew Elwell, DefenceIQ

The Latin American market for offshore patrol vessels will be potentially very lucrative over the coming years, but what are the challenges in penetrating this market and exploiting the opportunities available in the region?

Dave McMillan, President at STX Canada Marine Inc., a consulting naval architecture and marine engineering company, insists that while this is an emerging market issues such as budget restrictions are still barriers to entry.

“Many other Latin American countries are considering OPV’s but in almost all cases budget issues are the greatest concern,” McMillan said.

However, McMillan is still confident that opportunities are firmly “outside Europe since it is developing countries with emerging economies where the true future of the OPV market lies.

“Latin America, Asia and Africa will be the hot spots in the future – the main question being whether they have the budget and government will-power to move ahead with their expectations on affordable maritime security,” said McMillan.

Carnivàle in Rio?

What about the Brazilian market for OPVs – does that present the greatest potential for growth in the region for companies such as STX?

At the start of the year, BAE Systems finalised an agreement with the Brazilian Navy to supply it with three Offshore Patrol Vessels at the cost of £133 million. The contract included a manufacturing license for the Brazilians to continue to build additional OPVs if it so wishes, and speaks volumes about the growing importance of these platforms.

But while the BAE contract signals a greater need for OPVs in the future, McMillan is reluctant to believe that Brazil offers untold riches.

“From an OPV standpoint the market in Brazil is relatively modest due to the fact there is only one project on the horizon at the moment although the final number of vessels in the OPV program has still to be determined,” McMillan starts. “There may be others but most likely smaller vessels. One of the challenges we encountered during the current OPV program was the lack of interest from in-country shipyards that are more focused on the long term offshore support vessel market for Petrobras.

Shortly before the BAE announcement, Rear Admiral Francisco Deiana, the Brazilian Navy’s Director of Engineering, informed a Defence IQ delegation of the country’s plans for expanding its offshore patrol fleet given the immediate maritime challenges it faces.

“Natural resources, maritime traffic, and the biodiversity of the Brazilian jurisdictional waters represent strategic national interests subject to risk associated to unauthorised presence of ships, drug trafficking, smuggling, piracy, illegal fishing, terrorism and marine pollution,” Deiana said.

I asked if major event such as the World Cup 2014 and Olympics 2016 would boost Brazil’s need to further OPVs and other naval platforms.

“These large international events will certainly require enhanced marine security and the short term purchase of the BAE OPV’s will help the situation,” McMillan confirmed.

However, in the main he agreed with Deiana, adding, “Of more significance is protection of the offshore resources where they do not want or need to use a fully combat capable platform and the OPV is the ideal solution. I believe this will be a greater driver for the market in Latin America … the primary role of an OPV in our mind is surveillance.”

To put the risks Deiana talks about into perspective, Brazil is tasked with protecting its current production of 2.18 million barrels of oil a day and has hopes of expanding this to 4 million a day by 2020. 91% of these oil reserves lie in the ‘Blue Amazon’ coastal region and add a staggering $71 billion each year to the economy.

Source: DefenceIQ

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