Transcript Slide 1

LOCAL CONTENT CERTIFICATION
HOUSTON SEMINAR
December 06, 2011
Brazilian Local Content Seminar:
Agenda:
8:00 - 9:00 AM
Registration/Breakfast
9:00 - 11:30 AM
Presentation
11:30 - 12:30 PM
Question and Answers
12:30 - 2:00 PM
Closing Remarks and Lunch
Brazilian Oil & Gas Market:
Highlights:
• Brazil is the 7th largest oil consumer in the
world and ranks the 41st in natural gas
consumption.
• Solid regulations environment:
• Successful & strong concession agreements
• Pre-salt fields
• More than 70 active operators
• More than 3500 blocks offered & 730
concession agreements
• Lots of gaps (technology, HR, infrastructure,
etc)
Demand for Petroleum:
Total Oil Consumption by Country (mmbo/d)
20.7 7.9
6
Brazil is world’s
eighth-largest oil
consumer
5.1
4
2.7
2.7
2.4
2.4
2.3
2.2
2.2
2.0
2
1.9
1.7
1.7
1.6
Total Oil Consumption mb/d (index)
Iran
UK
Italy
France
Mexico
Saudi
Brazil
Canada
S. Korea
Germany
Russia
India
Japan
China
US
0
160
World
OECD
Brazil
150
140
Brazil oil consumption growing at 2.4%
per year.
130
120
2007
2005
2006
2003
2004
2002
2001
2000
1999
1998
1997
1995
1996
1994
1993
100
1991
110
1990
OECD oil consumption growing at 1%
per year.
1992
8
Source: Strategic Plan of Petrobras
4
Demand for Petroleum:
Source: Strategic Plan of Petrobras
5
Strategic Plan of Investments:
(Results of Bid Rounds)
Source: ANP (2011)
6
Strategic Plan of Investments:
(Petrobras Plan for 2010-2014)
Source: Strategic Plan of Petrobras
7
Strategic Plan of Investments:
(Major Oil Projects)
Source: Strategic Plan Petrobras
8
Strategic Plan of Investments:
(Pre-Salt Province)
Pre-Salt Province
Source: Strategic Plan Petrobras
9
Strategic Plan of Investments:
10
Strategic Plan of Investments:
(Declared Investments Oct. 2011-US$)
Bid 7 to 10
Total
Total (10? US$) Local (10? US$)
8,63
4,36
Local Certified (10?US$)
1,83
Source: ANP (Oct. 2011)
11
Local Content Purpose:
“ The purpose of the local content (LC) requirement is to
increase, on a competitive base, the share of the domestic
manufacturers and service firms in the chain of suppliers for
petroleum and natural gas.
This policy foster growth of segments of domestic
manufacturing companies, technological development of
the country, training of local human resources and
generates jobs and income.”
Source: ANP
12
Context of the Government Policy:
Participation of Brazilian
Industry Sector
PROMOTION
Brazilian Training and
Technology Development
Income generation
and employment
in Brazil
13
Local Content Concept :
What is Local Content?
"Local Content” is the ratio of the value to goods produced
and services rendered in the country to perform the contract and
the total value of goods and services used for this purpose.“
Brazilian Cost of Goods and Services
X 100
%LC =
Sales Price of Goods and Services
(Law Project 5938/2009 Contrato de Partilha de
Produção)
(Law 12.351/2010 - Production Sharing Contract)
14
Legal Framework:
1997
1995
Constitutional
Amendment n.º 9
Flexibilization of
Petrobras monopoly
■
■
■
■
■
■
■
Law of Petroleum
9.478/97
“End of Petrobras
monopoly”
Principles and objectives of the National Energy Policy;
National Energy Policy Council (CNPE);
Creation of the ANP - National Petroleum Agency;
Establishment of concessions rules;
Establishment of bidding rounds;
Definition of government participation;
Definition of round ZERO for Petrobras;
15
Local Content on Bid Rounds:
Bids 1 to 6: LC Calculation By Declaration
From Bid 7: LC Calculation By 3rd part
16
Local Content on Bid 7 to 10:
(% of Limits Minimum and Maximum)
EXPLORATION PHASE
DEVELOPMENT PHASE
BLOCK LOCATION
Minimum %
Maximum %
Minimum %
Maximum %
DEEP WATER
P ≥ 400m
37
55
55
65
SHALLOW WATER
100m ≤ P < 400m
37
55
55
65
SHALLOW WATER
P< 100m
51
60
63
70
ONSHORE
70
80
77
85
17
Local Content on Bid 7 to 10:
(Limits % Minimum and Maximum)
Global Local
Content
(By System)
Local Content
By Item
18
Local Content Commitments on Concession
Agreements:
Source: ANP Presentation
19
Certifications Performed (Oct. 2011):
6524
Issued by ABSG
2636
Source: ANP
20
Scope – Concession Contracts:
Production Phase
Stages
Exploration Phase
Development
SUBJECT TO
LOCAL CONTENT
Production
NOT SUBJECT TO LC
CERTIFICATION
21
Concession Contracts:
(Contractual Requirements)
Local
LocalContent
Content Certification
CertificationRequired
Requiredat
atthe
theConcession
Concession
Contract
Contract::
“Clause
“Clause20.3:
20.3:
The
Theconcessionary
concessionarycommitments
commitmentsrelated
relatedtotothe
thelocal
localacquisition
acquisitionofofgoods
goods
and
andservices
serviceswill
willbe
beconfirmed
confirmedtotoANP
ANPvia
viathe
thesubmittal
submittalofofaalocal
localcontent
content
certificate.”
certificate.”
“Clause
“Clause20.4:
20.4:
The
Theconcessionaries
concessionariesshall
shallrequest
requesttototheir
theirgoods
goodsand
andservices
servicesvendors
vendorsthe
the
certificates
certificatesofoftheir
theirproducts.
products.Furthermore,
Furthermore,the
thevendors
vendorscan,
can,by
bytheir
theirown
own
initiative,
initiative,seek
seekprevious
previouscertification
certificationofoftheir
theirproducts.”
products.”
22
Concession Contracts:
(Contractual Requirements)
“Clause 20.5:
“Clause 20.5:
The certification activities shall be developed by entities duly qualified and
The certification activities shall be developed by entities duly qualified and
acknowledged by ANP, based on criteria previously defined by the agency
acknowledged by ANP, based on criteria previously defined by the agency
itself.”
itself.”
“Clause 20.6:
“Clause 20.6:
ANP will implement a local content system and will perform periodic audits
ANP will implement a local content system and will perform periodic audits
on the qualified entities.”
on the qualified entities.”
23
Range - Areas of Activity:
Activity
Area Code
GE001
PE001
PE002
PE003
EN001
EN002
EN003
EN004
ES001
ES002
UP001
UP002
UP003
UP004
ES003
ES004
UP005
UP006
UP007
UP008
EN005
Area of Activity
Geology and Geophysics
Drilling Rigs
Logistics and Operational Support
Drilling, Completion and Evaluation of wells
Basic and Detailed Engineering
Management, Construction, Assembly and Comissioning
Control, Instrumentation, Measurement and Electric Systems
Telecommunication Systems
Pipelines, Gas Lines and Storage Tanks
Transfer Pumps
Compression Units
Power Generation Units
Steam Generation and Injection
Water Treatment and Injection
Subsea Equipments and Controls: rigid and flexible lines, umbilicals
and manifolds
Monobuoys and Buoys
Oil Processing and Treatment Systems
Natural Gas Processing and Treatment Systems
Ship Construction (hull, turret, other systems)
Operational Safety
Civil Construction and Utilities
24
ANP Regulations:
 ANP RESOLUTION # 36, Nov, 13, 2007:
Approves the Regulation ANP # 6/2007, that defines the criteria and procedures
for the development of the local content certification activities.
 ANP RESOLUTION # 37, Nov, 13, 2007:
Approves the Regulation ANP # 7/2007, that defines the criteria and procedures
for the registration and habilitation of Local Content Certification entities.
 ANP RESOLUTION # 38, Nov, 13, 2007:
Approves the Regulation ANP # 8/2007, that defines the criteria and procedures
for the auditing of local content of goods and services certification entities.
 ANP RESOLUTION # 39, Nov, 13, 2007:
Approves the Regulation ANP # 9/2007, the sets the rules and the format for the
submittal of the reports.
 TECHNICAL BULLETINS Nº 1 TO 27, INCLUDING Nº 12- Rev.01
Note: The Regulations can be found on the website of the ANP (www.anp.gov.br) by clicking “Local
Content” on the right-hand side menu.
25
ANP Regulation # 36:
(Purpose and Application)
 Applicable to the Concession contracts signed by ANP with the
concessionaries effective from the 7th round on.
 Effective as of Sept. 11, 2008.
 Contracts signed BEFORE Sept. 11,2008 that have any type of change in
price, term, or scope, under the way of a contractual addition dated
after Sept. 11, 2008 shall be certified, provided there the concessionary
needs to prove that there has been local investments.
 Supply scope involving goods and services, defined by service order or
similar document, issued after Sept. 11, 2008, shall be certified, even if
the associated mixed contract (umbrella) have been made effective
before Sept. 11, 2008.
26
ANP Regulation # 36:
(Purpose and Application)
 Goods stocked at the Concessionaire before Sept. 11, 2008 are not
required to be certified.
Sept, 11, 2008
Concessionaire
Investment
Report
Stock
Used on
the project
For Goods stocked
before Sept, 11, 2008
% LC is set by customer
statement only.
Local Content
Statement.
ANP
27
Certification Activities/Concepts:
 A Services contract between the Contracting entity and the Certification
entity shall be signed.
 Up to 30 days after the execution of above mentioned contract, the
Certification entity shall inform to ANP the relevant information
regarding what type of activity the goods, or the good for transient use,
or the service, relate to.
 In order to perform its work, the certification entity must have access to
all information necessary to the conduction and conclusion of the work.
 Totally imported items, without any local content, will not be certified.
 In case the supply has partial shipments, a global Certificate can be
issued at the end of the supply.
28
Certification Activities/Concepts:
Certification
Authority
Auditing
Trimestral
Certification
Report
Certificates
Certificatio
n Contract
Certificates
Trim. Invest.
Report
ANP
Certification
Contract
Contract of
Concession
Contract of Supply
Oil & Gas
Company
SUPPLIER
Invoices &
Certificates
29
Certification Activities/Concepts:
 For all standard serial item, and as long as there has not been any change
in its specifications, composition or production process, and provided its
local content certificate has not suffered changes of more than 10% (up
or down), the original certification can be accepted during a maximum of
a 4 year period.
CL % VARIATION LESS THAN 10 % = ORIGINAL CERTIFICATE VALID FOR 4 ANOS
NOTE:
In this case the supplier must attach to each new invoice a copy of the original
local content certificate, together with an statement that there has been no
change on the product (good or service) since its original certification.
Invoice
+
Copy of
Certificate
+
Statement of
“no changed”
30
Certification Activities/Concepts:
 The supplier can hire the certification of its products, regardless of to
what concessionary will it be supplied. At the moment of delivery of the
goods the supplier shall handle the invoice, together with the Certificate.
COMMERCIAL TRANSACTION = INVOICE + LC CERTIFICATE
 In case of transfer of the good, goods for transient use or services, the
certificate must be equally issued, and the local content indicator of the
aforementioned goods will be transferred and used on the new
concessionary local content account.
 All fiscal documents related to a commercial transaction, except those
related to partial shipments, that are subject to local content
certification, must be accompanied by the corresponding local content
certificate for each item.
31
Certification Activities/Concepts:
 Goods or Services with LC equal or less than 10% will be considered as
“totally imported”, i.e., with LC equal to ZERO. An exception is made for
seismic data acquisition, leasing of drill ships for offshore projects and
acquisition of bits.
If LC ≤ 10%, then it will be = 0%
 Costs related to air tickets, lodging, food and similar, resulting from
foreign labor (without permanent visa), are to be considered null in
regards to measuring the LC, even when paid by companies located in
Brazil.
 Local Labor: It is the labor proceeding from the employment of Brazilian
citizens or foreigners with a permanent visa, hired on the service
provider establishment , or in its sub-contractors, all duly inscribed at the
Brazilian Register of Companies (CNPJ).
32
Certification Activities/Concepts:
 Goods manufactured abroad and later on nacionalized, will be considered
imported for the purpose of LC. The criteria of origin takes place, and the
LC Book has to be considered.
 A good manufactured in Brazil and later exported, when imported back
to the country will only be considered applicable for LC purposes if it was
certified before being exported. In case of goods for transient use, it is
also necessary for the service provider to have CNPJ. On the contrary, the
LC will be considered ZERO.
 In case of Repetro – fictitious exportation of goods manufactured in Brasil
with later temporary admission (for example, leasing), the LC will be
considered null.
33
Certification Activities/Concepts:
Owner - Foreign
Country
Brazil Manufacture
Company
Imported
Manufacture
of good
Imported
Good
Exported
Local Content
Certificate
Operation In Brazil
Company with
CNPJ
Local Content
Yes
Company without
CNPJ
Yes
Local content
0%
34
Certification Activities/Concepts :
(Good for Transiente Use)
Client “B”
(Supplier)
Manufactured
Contract
Certification
Contract - Not
Possible
Main
Contract
Outside Brazil
Client “A”
(Owner)
Brazilian
Subcontractor
(Shipyard)
LC Certification
Contract - YES
Certification
Company
Brazil
Yes
35
Certification Activities/Concepts :
(Exported and Imported Equipment)
LC = 100%
Exported
Sales Price =
R$ 50.000,00
with LC
Certificate
LC = R$
50.000,00
+
+
LC = 18,86%
Imported
Total Sales Price =
R$ 265.000,00
Outside Brazil
Local Content = R$
50.000,00
Imported Part = R$
215.000,00
Brazil
36
Certification Activities/Concepts :
(Local Indirect Expenses and Costs)
 How to deal with Local Overhead Costs associated with Administrative
Support, and areas such as Finance, HR, Legal?
 How shall Local Licences such as IBAMA, ANP, CREA, etc., be considered ?
 How shall Local Expenditures with utilities such as water, light,
telephone, etc. be considered ?
 How shall Local Expenses related to penalties be considered ?
 How shall Local Expenses associated with consulting in general, such as in
finance, as well as expenses related to the judicial systems, such as
processing fees ?
 How shall other Local Indirect Costs be considered?
Local Indirect Local Costs and Expenses will be Considered
as a “Contract Difference”.
37
Certification Activities/Concepts :
(Local Indirect Expenses and Costs - Example)
Sales Price
=
National Cost
+
Imported Cost
+
Contract
Difference
IC = 250
+
CD = 50
Example:
SP = 1000
=
NC = 700
+
Total NC = 700 + 50
%LC=
X 100
=
75,0 %
SP = 1000
38
Certification Activities/Concepts :
 The Anticipated Certification (without contract) is only possible when the
object of certification is a Good. This concept of anticipated certification
can not be applied to SERVICES.
 The issue of a Certificate for SERVICES is only possible under a contract
between the service provider and its client, and there will be the need to
issue one certificate for each service, even if the scope of the service is
the same.
 The certification concept is valid for products, not for companies.
 The certification entities shall keep permanent records of all certificates
issued. Each certificate and related documents that are part of the
certification scope shall remain available for auditing for a period of 5
year.
39
Certification Activities/Concepts :
 Computers, monitors, notebooks, servers, and other information
technology goods that can be used on services not exclusive or not
predominant of the Oil & Gas industry will be measured by the simplified
criteria, i. e., the origin of the GOOD is to be checked against the
purchasing invoice documentation.
 Goods used for logistic services, such as vehicles, trucks, boats,
helicopters, airplanes, cranes, winches, hoists, etc. – that can be said to
be of non exclusive or non predominant use on the Oil & Gas industry,
will have its LC evaluation done via the simplified method, i. e., the
procedure of the GOOD shall be checked against the purchasing invoice
documentation. This way the measurement of the components of the
GOOD will not be required.
Don´t need to open the Good and certify the components/items.
40
Certification Activities/Audits :
 The Certification entity is the sole responsible for the local content
certificate information. Once issued, in no instance it will loose its validity
for the purpose of local content assessment, except in proven cases of
deceit or fraud.
 Criteria and procedure for the auditing of the certifying entities approved
by ANP are set on Regulation # 8/2007 from ANP. The audits will be
performed in the following instances:
 When there is denunciation of irregularities.;
 In order to verify the fulfilment of the “Warning term”;
 In all contracts finalized by a certification entity that has been
suspended;
 At any time, under a Beginning of Audit Notification.
Notes:
(1) The certification entity is obliged to make available all the documentation defined on the work scope,
as indicated on the Beginning of Audit Notification.
(2) During the course of an audit, if the auditors believe it pertinent the “in loco” verification of any
document, process, third party procedure, or even a raw material, component, part, equipment,
machine or services, the Certification entity shall make these items available under a 10 days warning.
41
Certification Activities/Methodology :
(Common Nomenclature Of Mercosul – NCM)
NCM ≥ 84
All the goods, equipment or parts
whose NCM ≥ 84 must have their LC
Certified.
For goods, equipment or parts
whose NCM < 84, the LC is not
required to be Certified. It will be
measured by a Simplified Method and
the LC will be 100% or 0%.
NCM < 84
42
Certification Activities/Methodology :
(Local Content of Goods - Clb)
Clb is the % that corresponds to the ratio between: The difference between
the Total Sales Price (Vt) (excluding IPI and ICMS taxes) and the value of its
imported portion (Vi):
% CLb = (1- Vi / Vt) . 100, where Vi = Vt – Vn
Vi = Value of the Imported items (in R$) including raw material and adding:
 Components imported directly by the manufacturer;
 Components imported directly by the buyer;
 Components imported by third parties and purchased locally by the manufacturer or
buyer;
 Part of imported components purchased locally by the manufacturer or buyer.
Vn = Value of National components (in R$) .
Vt = Sales Price of the Good (in R$), excluding IPI and ICMS taxes.
43
Certification Activities/Methodology :
(Local Content of Goods for Transient Use - Cla)
The Local Content of Goods for transient use (Cla) will be equivalent to the
Local Content of the Good under consideration (Clb) provided the company
performing the service is registered on the Brazilian Registar of Companies
(CNPJ).
CLa(%) = CLb (%)
The value of the National Content of this activity will be calculated using the
% CLb of the good applied to the Contract Value (VC):
National Content Value = CLb (%) x VC
CLa = Local Content of the good under transient use
VC= Value of the contract for the transient use of the good excluding IPI and ICMS taxes.
44
Certification Activities/Methodology :
(Local Labor Utilization - ILs)
% of the Local Content of services, including software, will be measured thru
the index of local labor utilization of the services (ILs). O (ILs) shall be
applied to the value of the contracted services, excluding ISS tax.
The ILs % shall be calculated according to below formula, provided the
company is register at the Brazilian Registar of Companies (CNPJ).
ILs (%) = (CMN / CTM) x 100
CTM = Total Cost of necessary or effectively used labor (excluding ISS Tax)
CMN = Total Cost of National necessary of effectively used labor (excluding
ISS tax).
45
Certificate Template:
The certificates are to be issued in
Portuguese language and shall be coded
according to the following rule:
xxx – yy – zzzzzzzzzzzzzz– www
xxx: ANP registration number of the
certification entity;
yy: code of E&P activity area;
zzzzzzzzzzzzzz: CNPJ number of the
company for which the product was
certified;
www: sequential number of the
certificate.
46
Local Content Calculation:
(Example 1 - Good For Transient Use)
47
Local Content Calculation–Example 1:
(Breakdown of Items)
SUBSYSTEMS
ITEMS
Engine
+
SYSTEM
Drill Ship Unit
BOP
Components
+
+
Hull, Structural parts
and Integatrion
Services
+
Derrick
+
Expenses
+
Processing Module
& Mud Module
+
Azimuth Thruster
48
Local Content Calculation–Example 1:
MEASUREMENT ITEM
ORIGEN
NATIONAL COST
(R$)
FOREIGN COST
(R$)
1.0 Engine
1.1 Goods/Components Parts
Imported
0,00
65.000.000,00
1.2 Services
Imported
0,00
0,00
1.3 Expenses
Nacional
15.500,00
0,00
2.1 Goods/Components Parts
Imported
0,00
45.000.000,00
2.2 Services
Imported
0,00
0,00
2.3 Expenses
Nacional
6.500,00
0,00
Imp./Nacional
44.500.000,00
7.500.000,00
3.2 Services
Nacional
11.125.000,00
0,00
3.3 Expenses
Nacional
450.000,00
0,00
Imp./Nacional
5.600.000,00
2.500.000,00
4.2 Services
Nacional
1.680.000,00
0,00
4.3 Expenses
Nacional
250.000,00
0,00
2.0 BOP
3.0 Processing & Mud Modules
3.1 Goods/Components Parts
4.0 Riser Pipe
4.1 Goods/Components Parts
49
Local Content Calculation–Example 1:
MEASUREMENT ITEM
ORIGEN
NATIONAL COST
(R$)
FOREIGN COST
(R$)
5.0 Derrick
5.1 Goods/Components Parts
Imp./Nacional
45.000.000,00
15.000.000,00
5.2 Services
Nacional
13.500.000,00
0,00
5.3 Expenses
Nacional
125.500,00
0,00
6.1 Goods/Components Parts
Imported
0,00
35.000.000,00
6.2 Services
Imported
0,00
0,00
6.3 Expenses
Nacional
6.500,00
0,00
7.1 Goods/Components Parts
Imported
0,00
7.500.000,00
7.2 Services
Nacional
350.000,00
0,00
7.3 Expenses
Nacional
50.000,00
0,00
8.1 Goods/Components Parts
Nacional
65.600.000,00
0,00
8.2 Services
Nacional
19.680.000,00
0,00
8.3 Expenses
Nacional
250.000,00
0,00
6.0 Azimuth Thruster
7.0 Knuckle Crane
8.0 Hull & Structural Items
50
Local Content Calculation–Example 1:
MEASUREMENT ITEM
ORIGEN
NATIONAL COST
(R$)
FOREIGN COST
(R$)
9.0 Integration
9.1 Goods/Components Parts
Nacional
35.600.000,00
0,00
9.2 Services
Nacional
10.680.000,00
0,00
9.3 Expenses
Nacional
250.000,00
0,00
196.300.000,00
177.500.000,00
10.2 Services
57.015.000,00
0,00
10.3 Expenses
1.404.000,00
0,00
10.0 TOTAL COST
10.1 Goods/Components Parts
National Cost (Nc) = R$ 254.719.000,00
Foreign Cost (Fc) = R$ 177.500.000,00
Sales Price (Sp) = R$ 560.000.000,00
51
Local Content Calculation–Example 1:
Foreing Cost (Fc)
%CLa
=
1 -
X 100
Sales Price (Sp)
R$ 177.500.000,00
%CLa
=
X 100 =
1-
68,3%
R$ 560.000.000,00
52
Local Content Calculation:
(Example 2 – Charter Contract)
Drilling Ship (1) = R$ 560 MM.
Life Expectancy (2) = 25 years
Year Rate = R$ 26 MM
Daily Rate = 26 MM / 360 = R$ 72.222,00
Utilization= 180 days
Service´s Value = 180 x 72.222,00
= R$ 13.000.000,00
National Cost =
R$ 8.879.000,00
CL = 68,30%
Foreing Cost =
R$ 4.121.000,00
53
Local Content Calculation:
(Example 2 – Charter Contract)
Sales Price (Sp) = R$ 35.000.000,00
Foreing Cost (Fc)
%CL
=
1 -
X 100
Sales Price (Sp)
R$ 4.121.000,00
%CL
=
X 100 = 82,2%
1R$ 35.000.000,00
54
Local Content Calculation:
(Example 3 - Charter Contract with Services)
ITEMS
MAN POWER INCLUDING ENGINEERING AND
ONSHORE OPERATION SUPPORT (1)
TOTAL COST
WITHOUT TAXES
NATIONALCOST
(BC)
FOREING COST (FC)
2.013.058,00
198.852,00
1.814.206,00
13.000.000,00
8.879.000,00
4.121.000,00
SUPPLY BOAT – Charter Contract
5.250.000,00
1.575.000,00
3.675.000,00
SPECIAL TOLLS
1.750.000,00
0,00
1.750.000,00
350.000,00
350.000,00
0,00
1.500.000,00
1.500.000,00
0,00
550.000,00
550.000,00
0,00
TOTAL COST (1)
24.413.058,00
13.052.852,00
11.360.206,00
SALES PRICE (2)
38.500.000,00
14.086.942,00
0,00
27.139.794,00
11.360.206,00
DRILLING SHIP – Charter Contract (2)
CATERING
CHEMICAL AND LUBRIFICANTS
SPARE PARTS
CONTRACT DIFFERENCE (2) - (1)
TOTAL FINAL COSTS
CONTEÚDO LOCAL = CN / PV
38.500.000,00
70,49%
55
Penalty (Example):
Offered Local Content = 60%
Committed Total Investment – IT (Exploration Phase) = R$ 100 million
Committed National Investment = 60% x R$ 100 million = R$ 60 million
Done Local Content = 40%
Local Content not met (NR %) = 20%, equivalent to 33% of the committed rate
of 60%
33,33%
33,33%
Penalty (M)= 60%
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Penalty (Example):
Local Investment not Realized (INR):
INR = ∆CL x IT = 20% x US$ 100 Million = US$ 20 Million
Amount of Penalty (VM):
VM = M x INR = 60% x US$ 20 Million = US$ 12 Million
Conclusion:
The amount of fine (penalty) is US$ 12 Million, equivalent to 12% of the total
amount invested in the contract.
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How to Implement a Sucessful LC Program:

Selecting and preparing staff and the
internal organization for the Local
Content rules (ANP);

Implement a consistent training
program with the Certification
Authority assistance if necessary.

Making Partnership and cooperation
with local companies.

Setting production units in Brazil.

Increasing the participation of local labor on services.

Obtaining local content certification on goods and services.

Expand the dialog and interaction with the suppliers building a strong
relationship capable of facing controversial issues.
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Local Content Challenges:
(Local Content Regulation by ANP: 11th Bid Round & Pre-Salt
Bid Round)
 Simplification the table of commitments and offers of Local Content.
 Adjust the definitions of items of the Local Content commitments
(Resolution Nº 39/2007 ANP).
 Simplify the procedures for Local Content Certification, giving focus on
the relevant activities. (Resolution Nº 36/2007 ANP).
 Transparency of actions.
 Dialogue with the industry.
 Increase the volume of Local
investments (certifications).
 Inform the market about certification
process and its rules.
Source: ANP
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Brazilian Local Content Tendency:
(Opportunities & Risks)
 Brazil is the biggest exploratory opportunity in
the world.
 Brazilian petroleum sector is an extraordinary
(worldwide) business opportunity for petroleum
companies and for goods & services suppliers.
 ANP will promote the 11º Bid Round in a short
time.
 ANP is working to promote the 1st Bid Round
focusing Pre-salt opportunities.
 The Brazilian policy for the O&G sector aims to reach a strong degree of
nationalization and boost the Brazilian industry.
 Current investments in the supply chain have sufficient magnitude to
induce the local industry.
Source: ANP
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Brazilian Local Content Tendency:
(Opportunities & Risks)
 According to Brazilian Policy foreign investments are welcome.
 Automobilist Industry is now required to attend as a Minimum 60% of
Local Content.
 There is a tendency to have soon a minimum Local Content indice
required for O&G production, refinery and mining.
 There is the risk of the supplier does not reach the compromised LC
level. In this case, a penalty may be applied.
 If the penalties happens in a systematic way, supllier´s position in the
market may also be affected.
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Local Content Around the World:
•
•
•
•
•
•
•
•
•
Angola
Azerbaijão
Brasil
China
Egito
Guine Equatorial
Inglaterra
Irã
Kazaquistão
•
•
•
•
•
•
•
•
•
Líbia
Malasia
Nigéria
Noruega
Papua Nova Guiné
Rússia
Trinidad
Venezuela
Yemen
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Contacts in Brazil:
Contacts in Houston:
 Eugenio Singer
[email protected]
Tel. 021-3232.1730 / 91829026
 Alcides Costa
[email protected]
Tel. 021-3232.1758 / 9912.9694
 Thereza Moreira
[email protected]
Tel.021-3232.1706
 [email protected]
Tel. 021-3232.1700
 Henrique Paula
[email protected]
Ph: 281 673-2864 / 713 859-9682
 Greg Jandjel
[email protected]
Ph: 281 673-2781 / 832 969-6767
 www.absconsulting.com.br
 www.absconsulting.com
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