BG Pays $71 Million for Local-Content Breaches in Brazil
12:57 PM BRST
February 3, 2015
(Bloomberg) — BG Group Plc, the U.K.’s third-largest natural-gas producer, paid 192.5 million reais ($71 million) in fines in Brazil for breaching local-content rules at an offshore project where it didn’t find commercial volumes of oil.
BG was the operator of the BM-S-52 offshore concession with a 40 percent stake and Petroleo Brasileiro SA had 60 percent until the partners returned the concession in 2012. BG paid the entire fine even though a portion corresponds to state-run Petrobras, people with knowledge of the matter said, asking not to be named because it hadn’t been made public.
Brazil’s efforts to expand the domestic oil services and shipbuilding industries have created additional costs for oil explorers at a time crude prices are trading near six-year lows. Brazil’s National Petroleum Agency, known as ANP, is auditing concessions granted in 2005 under the so-called Round 7, and is preparing additional fines, the people said. In Brazil, local content requirements vary depending on each project.
BP was granting a 30 percent discount for opting against disputing the original fine of 270 million reais, ANP said in an e-mailed response to Bloomberg.
The Reading, England-based company confirmed it paid a fine related to local content at the project in an e-mailed response, without verifying the amount. Each partner has to pay a percentage corresponding to its stake, it said.
Petrobras didn’t respond to e-mails and phone calls requesting comment. Petrobras has disputed local content fines from the ANP in the past.