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March 07, 2017

Newsletter - Oil & Gas - Brazil´s Federal Government seeks to reduce by 50% the minimum percentages of local content

On February 22, 2017, the Minister of Mines and Energy, Fernando Coelho Filho, announced the new proposal of the Federal Government for the local content policy related to the bidding rounds promoted by the Brazilian Agency of Petroleum, Natural Gas and Biofuels ("ANP"), in order to reduce, on average, by 50% the minimum percentage of local content.

After a dialogue with representatives of the Ministry of Finance, the Office of the Chief of Staff, the Ministry of Industry, Foreign Trade and Services, Minister Fernando Coelho Filho declared that the Federal Government aims to establish realistic numbers for the minimum percentages of local content and to decrease the number of waiver requests made by oil companies that fail to meet local content requirements.

According to the Government's proposal, the new percentages of local content in onshore areas will be 50% for exploration and production activities. In offshore areas, the new percentages will consist of 18% for exploration, 25% for well constructions, 40% for collection and disposal systems, and 25% for stationary production units ("SPUs").

It is worth noting that the new percentages will still be submitted to the management committee of PEDEFOR (Incentive Programme for Supply Chain Competitiveness and the Development and Improvement of Suppliers to the Oil and Gas Sector) and shall be analyzed by the Brazilian National Board of Energetic Policy ("CNPE") in a possible extraordinary meeting to be held during the month of March.

If approved, this measure may allow a bigger participation of strategic players in the auctions expected to occur during 2017, since it represents a solution built after a long debate among various sectors of the Brazilian oil industry.

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