whether the block is onshore, in shallow water, or in deep water) and varies between exploration and development phases. Minimum requirements were made item and subitem specific. In addition, the bidding evaluation formula was modified introduce a minimum local content requirement. The mandatory minimum requirement and evaluation formula were amended in later bidding rounds. By 2017 minimum local content requirements are expected to gradually increase to as high as 95 percent. Table 2.7 summarizes the local content requirements and bidding evaluation process for bidding rounds one through nine. Table 2.7 Brazil: Local Content in the Bidding Process, 1999–2007 Bidding Round Year
1
2
3
4
5
6
7
8
9
1999
2000
2001
2002
2003
2004
2005
2006
2007
30% for class A blocks*. Exploration phase
None.
50% for class B blocks. 70% for class C blocks.
Minimum local content requirement
30% for class A blocks. Development phase
None.
60% for class B blocks. 70% for class C blocks.
37% for deep water and shallow water starting at 100 million. 51% for shallow water up to 100 million. 70% for onshore blocks. 55% for deep water and shallow water starting at 100 million. 63% for shallow water up to 100 million. 77% for onshore blocks.
Maximum value for local content allowed
50% for exploration and 70% for development. 85% signature bonus.
Bid evaluation weights
12% local content in development phase. 3% local content in exploratory phase.
Ten points over the minimum percentage. 30% signature bonus.
40% signature bonus.
15% local content in exploratory phase.
5% local content in exploratory phase.
25% local content in development phase.
15% local content in development.
30% minimum in exploratory program.
40% minimum in exploratory program.
Source: Based on data from ANP (http://www.anp.gov.br/brnd/round5/english/guia_julgamento.asp). Note: (*) These classes represent an operational classification where class A are unrestricted operators, class B are restricted to shallow water and onshore blocks, and class C are restricted to onshore and mature basins.
In case a higher local content level is achieved in the exploration phase, the incremental value achieved can be transferred to the development phase upon approval by the ANP. In case of noncompliance, upon award of contract, a fine is applied. The fine is based on a schedule linked to the nonrealized value of local investment (NR). Table 2.8 presents the schedule of fines from the seventh bidding round. Table 2.8 Brazil: Schedule of Fines in Case of Noncompliance with Local Content Requirements % of the Value of Unrealized Local Content (%NR)
Fine as a % of the Value of Unrealized Local Content
Below 65% From 65% to 100%
60% 1.143 x %NR – 0.14285
Source: Based on data from MENAS 2009.
In addition to these regulations, the concession contract includes provisions such as:
“Include Brazilian Suppliers in the companies invited to submit proposals”; “Grant access to a Portuguese or English version of the same technical specifications for all companies invited to submit proposals, and be disposed to accept equivalent specifications in accordance with the
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