The National Petroleum Agency (ANP) sets a precedent for exempting fines for breaking local content rules

The National Petroleum Agency (ANP) sets a precedent for exempting fines for breaking local content rules – one of the main pillars of the PT governments in the oil sector. In an unprecedented decision, the agency acknowledged that there are no support vessels in the country that meet the requirements applied since 2008. The measure acknowledges the 22 requests for exemption from the rule made by oil companies and can generate, according to analysts, a “ripple effect” on other items of local content policy.

The decision was made last week at the board meeting. The agency accepted the claim from the companies of the “inexistence of built or refurbished vessels in Brazil with local content certificate. ” The requests relate to a single item of vessels used for geological analysis contracted between 2008 and 2015.

The decision comes after a public hearing held in April. “The ANP did an umbrella resolution on an item that was the subject of several standing orders. This has a ripple effect in several cases, “said Fernando Villela, a partner of the regulatory sector at Siqueira Castro Advogados. “It should identify new items and conduct similar cases.”

Until then, only a request from the Norwegian company Statoil had been complied with by the agency. In all, the ANP analyzes more than 100 requests for exemptions for different items of local content policy. In 2014, still under the administration of President Dilma Rousseff, the agency had rejected 37 requests, claiming “timelessness”.

Established in 1999 as an attempt to encourage the Brazilian oil industry, the local content policy – which requires those companies that won a tender of an oil field, the hiring of a minimum amount of Brazilian companies made equipment –  made more rigorous since 2005, with more requirements. In the auction, the rule became effective as scoring criteria for the offers of the concession areas. In the last round, held in October, the local content rules have been identified as one of the causes of its failure – only 14% of the areas were secured.

The stricter rules were defended by President Dilma Rousseff as a measure to support domestic industry, particularly in the naval sector. In 2015, after signs favorable to changes in the rules, the now removed President said that the rules “here to stay” and dismissed ministers and advisers who advocated a review.

The companies argue that there are no competitive suppliers for some items required, which increases the costs of the projects and removes attractiveness to invest the country. “We hope that the mechanism is applied to other equipment and services that are not available in the Brazilian market in order to facilitate investment” says the IBP.

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