Oil companies recognize progress on new local content policy

The local content policy that was in force between 2005 and 2016 did not reach its objectives. The assessment by the Brazilian Court of Auditors last year, showed how the accumulation of fines, delays in the delivery of equipment and high costs affected the oil and gas industry in Brazil, concluding that “the national content policy is not tied to a broad industrial policy, has no defined terms and has generic objectives, without goals, and metrics that can objectively measure its results. ”

At Petrobras, there were delays of more than three years in the delivery of ten contracted platforms in 2010, causing the federal, state and municipal governments R $ 33 billion in tax revenues not collected over a period of eight years.

The first tender for the acquisition of the Libra field platform in the pre-salt area resulted in a price 40% higher than the international parameters, reflecting the requirements of the local content policy in force.

Therefore, Petrobras, Shell, Total, Statoil, CNOOC, CNPC, Repsol and Galp, represented at the Brazilian Petroleum Institute, understand that the changes announced by the government are very welcome. The adoption of feasible percentages of local content ensures predictability for investors, encourages greater competition in the auctions and allows the domestic industry to have an important indicator of future demand.

The announced rules still have points that deserve deeper discussion, such as the end of the waiver and the enforcement of fines for failure to meet local content percentages. But the model adopted is simple and aligned with the local industry’s capacity and the practices of the oil and gas sector, is more transparent. It is, therefore, an instrument of industrial policy that is able to encourage new investments in oil and gas in Brazil and contribute to the resumption of the economy.

Petrobras Agency

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