explanation of the rationale behind these aspirations and policies. Officially, the ANP states the following four objectives:
Increase the participation of the national industry on a competitive basis Improve national technological development Improve the level of capabilities Create job opportunities for nationals and achieve growth in income (ANP 2009).
Over the coming decade, the government expects the creation of over 2 million jobs in the oil and gas value chain. As shown in Figure 2.14, this will be induced by organic growth in demand, increased participation of the local industry, and exports. Figure 2.14 Brazil: Number of Jobs to be Created in the Oil And Gas Value Chain, in Thousands 2,110 – 2,500 130 - 170
940 – 1,150
620 - 760 410 - 420
Actual Current
Increase in Demand
Increase in Supply Participation
Increase in Exports
Aspired Total
Source: Adapted from ONIP 2010. 2.3.2 Policy Tools
LCPs are enabled by an integrated set of tools that includes regulations, fiscal incentives, and support programs. Regulatory Requirements Local content requirements were not expressly laid out in the Oil Law of 1997 (Law number 9.478/97). The topic was briefly mentioned under the law’s main principles of the National Energy Policy (Redo 2010). To achieve the policy objectives, the ANP made local content commitment a provision in concession contracts and a component of the bidding process for oil and gas licenses. Accordingly, operators were asked to bid for the total percentage of equipment and services they were committed to source locally. Commitment value is phase specific (that is, for exploration and development). In the first four bidding rounds, no minimum requirement was set,24 and bids were evaluated based on a formula that weighed the bidders’ value of cash bonus and local content commitments. Cash bonus was given 85 percent and local content was given 3 percent for the exploration phase and 12 percent for the development phase. The total score was over 100 points, and points from local content commitments were calculated based on the following formula:
% of local content offered by bidder Local Content Weight of Local Content by Phase Maximum offered value A maximum value for local content was set at 50 percent for exploration and 70 percent for development. Starting from the fifth bidding round in 2003, the ANP introduced a minimum local content requirement to the Brazilian E&P licensing process. The local content requirement is location specific (that is, it depends on For evaluation purposes, domestic investments for a class of systems and production units count three times their value. Such systems include subsurface lifting systems, production gathering systems, and fixed platforms. Details are available in the Tender Protocol document of each bidding round. 24
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