Page 4 - LatAmOil Week 39

LatAmOil COMMENTARY LatAmOil

(Image: Petrobras)
Local content in Brazil

The South American country began phasing in LC requirements for the upstream oil

and gas sector in 1997 but has revised its expectations somewhat in the last few years

THIS article is the first in an occasional series location and maturity of the assets in question. It
providing overviews of local content (LC) reg- also stipulated that the specific requirements for
WHAT: ulations and requirements in individual Latin each project be spelled out in the relevant con-
Local content require- American states. tract and stated that minimum LC levels could
ments debuted after the Brazil started the process of developing local change over time.
liberalisation of Brazil’s content laws for oil and gas projects in the late This law laid a foundation for Brazil’s oil and
upstream oil and gas 1990s, after the government deregulated explo- gas LC regime, and it did so in time for the new-
industry. ration and production activities in the sector in ly-established National Agency of Petroleum,
1995. These laws replaced existing legislation Natural Gas and Biofuels (ANP) to launch the
WHY: that gave Petrobras, the national oil company country’s first exploration licensing round in
The government is trying (NOC), a monopoly over the oil and gas sector. 1999, in line with the reforms introduced four
to balance the interests years earlier. Under these circumstances, the
of foreign and private First components of legal regime government had an interest in addressing all the
investors while also The country took a step towards dismantling questions that came up as a result of partnership
developing local capacity.
that monopoly in 1997, with the adoption of a with international oil companies (IOCs).
WHAT NEXT: law providing for minimum LC requirements Changes in LC requirements
to be fixed during licensing rounds. (The law
ANP may reconsider LC
base levels once it is also obligated all licensees, including Petrobras The responses to these questions changed some-
ready to resume bidding as well as private and foreign investors, to meet what over the first decade of the 21st century.
rounds, but other issues these requirements.) As ANP proceeded with additional licensing
are likely to take priority. This law did not set a fixed minimum for rounds, its answers shifted from being more
LC. Rather, it allowed for adjustments in LC general and subjective to being more specific
requirements for licence areas according to the and objective.

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