Requirement of local content in oil exploration is reduced by 50%

Industry criticizes percentage and points out that decision is detrimental to the sector

After many obstacles and rescheduled meetings, the government finally set the new rules of local content for the oil and gas sector. According to the Minister of Mines and Energy, Fernando Coelho Filho, the new measure will reduce by about 50% on average, the requirement percentage in hiring equipment and services produced in the country in the oil and gas bidding in land areas.

In the offshore blocks, the minimum amount will be 18% in the exploration phase, 25% for well construction and 40% in collection and disposal systems. On platforms at sea, the percentage was 25%. Before the decision, the percentages were defined separately in each round of bids to formalize the auction.

The new methodology will be valid for the next bidding of the National Petroleum Agency (ANP) scheduled for September, the 14th round of blocks for oil and natural gas exploration and in November, the 3rd round of auction blocks in the pre-salt. The reduction was defined by change in the calculation of local content in equipment. The verification system will now be global.

According to minister of information, the understanding was that it would be better to have a low percentage instead of a high that is unrealizable. The government's objective is to offer more competitive for the oil and gas industry and give orders sufficient to maintain the domestic industry. Coelho Filho also said that there may be future revisions, but the principle the rules will be valid are these.

However, representatives of national industry criticize the new rules, considering the lousy percentage for industry as well as for employability in Brazil. According to Chairman of Oil and Gas of the Brazilian Machinery and Equipment Industry Association (Abimaq), Cesar Prata, told the Agency Brazil, the government ignored industry requests to the definition of local content had no global indexes .

According to Silver, the index for the platforms was much reduced from 65% to 25% for contracting services, which will reduce local labor and consequently decrease the hiring and increase layoffs in the sector.

Local content is the minimum amount of equipment, goods and services produced in the country. The winning companies in the bidding process, according to the ANP contract, have an obligation to maintain the participation of domestic industry in business, generating more jobs and income for Brazil. The new rules will be valid only for the next rounds of the end year, which are scheduled for June and July continue using the old standard.

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