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Local Content Strategy &
Implementation in Brazil
Agenda
• Brazil Today and Policy Framework
• Brazil PSC 1st Bidding
• Brazilian Local Content
• Success Story
− Shipyards
− Subsea
− Technology Center – Rio de Janeiro
• Challenges
Brazil Today and
Policy Framework
Area: 8,502,728 km²
Population: 202 million
GDP: US$ 1.8 trillion
World’s sixth largest economy
Over US$ 352 billion in International
Reserves
• Oil, Natural Gas and Biofuels regulated
under the same institutional
environment (ANP)
• Brazil can double its proven reserves
in the near future
Government
MME
(Ministry of Mines and
Energy)
CNPE
•
•
•
•
•
(National Council for
Energy Policy)
ANP
Certification
Companies
(National Agency of
Petroleum, Natural Gas and
Biofuels)
Concessionaires
Suppliers
IBP =>
Operator’s
forum to discuss
industry issues
ONIP =>
suppliers list and
suppliers
identification
ABESPETRO =>
Supplier’s forum
to discuss
industry issues
Brazil PSC 1st Bidding – Pre-Salt area
• Bid year: 2013
• Libra Oilfield – Santos Basin
• Bonus paid: US$5 billion;
• Exploration phase: LC = 37%.
• Development phase:
– LC = 55% for the first oil produced
until 2021
– LC = 59% thereafter.
JV
Share
(%)
Petrobras
30+10
Shell Brasil
20
Total S.A.
20
CNPC International Ltd
10
CNOOC International Ltd
10
Profit oil split
(%)
Petrobras as the only operator in Brazil PSC agreements - 30% minimum
41,65
Brazilian Local Content
• Local Content (LC) is now one of the major challenges of the Brazilian O&G
industry
• The LC policy evolution has gone through many changes over the years
• Percentages of LC work as award criteria (together with signature bonuses
and minimum work programs) at the ANP licensing rounds
• ANP has a robust process to validate LC evidence
• The LC policy encourages main international suppliers to be established in
Brazil, providing services and/or manufacturing equipments with Local
Content – Ex.: Subsea, Shipyard, Services
• Final LC percentages is affected significantly by 2nd and 3rd level suppliers
Brazilian Local Content Process - Main players
Provides information
about the LC part of
the purchase or
services
Responsible for
guaranteeing the
achievement of the
minimum LC (quarterly
reported to ANP)
Operator
Supplier
LC certification process
started in Round 7
• Defines and
monitors LC
• Accredits
certification
companies
ANP
Certification
Company
Evaluates and issues
LC certificates
Brazil Local Content - Minimum Requirements
Minimum
required by
ANP
Category
ANP
DEVELOPMENT
Certificate
ANP Category
DEVELOPMENT
LC evidence
ANP Category
EXPLORATION
LC evidence
Minimum
required by
ANP
Certificate
I- Geology & Geophysics
I.1 Acquisition
I.2 Processing and Interpretation
5%
40%
I - Drilling & Completion
II - Production Collection System
I.1 Rig Charter
II.1 Umbilical
10%
I.2 Drilling + Completion
II.2 Manifolds
30%
I.2.1 Wellhead
II.3 Lines Production / Flexible
45% Injection
I.2.2 Casing
II.4 Production Lines / Injection
Rigid
80%
I.2.3 Production Column
II.5 Flow Ducts
80%
I.2.4 Well Equipment
II.6 Pumping System
30%
I.2.5 Drill Bits
5%
II.7 Control System Submarine
II.8 Basic Engineering 55%
I.3 Others
I.3 Auxiliary Systems
II - Drilling & Completion
I.3.1 Electric System
Minimum
required by
ANP
ANP Category
40%DEVELOPMENT
80%
III.11.4.1 Pressure Vessels
80%
III.11.4.2 Ovens
80%
III.11.4.3 Tanks
90%
100%
100%
III.11.4.4 Process
Towers
III.11.4.5 Cooling Towers
III.11.4.6 Heat50%
Exchangers
50%
III.11.4.7 Pumps
II.1 Rig Charter
10%
I.3.2 Automation System
II.9 Detailing Engineering60%
95%
III.11.4.8 Steam
turb ines
60%
II.10 Management, Construction and Assembly
60%
II.2 Drilling + Completion
30%
I.3.3 Telecommunications System
II.11 Other
40%
II.2.1 Wellhead
45%
I.3.4 Fiscal Measurement System
III - Production Unit
60%
II.2.2 Casing
80%
I.3.5 Field Instrumentation
III.1 Basic Engineering
40%
II.2.3 Production Column
80%
I.4 - Logistics Support
II.2.4 Well Equipment
30%
I.5 Arvore de Natal
15%
III.2 Engineering Detailing
95%
III.11.4.13 Filters
85%
III.3 Management, Construction
and Assembly
60%
I.6 Others
III.4 Hull
II.2.5 Drill Bits
5%
II.3 Auxiliary Systems
55%
II - Production Collection System
III.5 Jacket
II.3.1 Electric System
60%
II.1 Umbilical
III.6 Naval Systems
II.3.2 Automation System
60%
II.2 Manifolds
II.3.3 Telecommunications System
II.3.4 Fiscal Measurement System
II.3.5 Field Instrumentation
Minimum
required by
ANP
85%
85%
85%
80%
70%
90%
III.11.4.9 Screw Compressors
70%
III.11.4.10 Reciprocating Compressors
70%
III.11.4.11 Diesel Engines (up to 600 HP)
90%
50%up to 24 "
III.11.4.12 valves
III.11.4.14 Burners
80% Protection
III.11.4.15 Cathodic
90%
85%
80%
90%
III.11.4.16 Electric System
60%
40%
80%
III.7 Simple Anchoring Systems
II.3 Lines Production / Flexible Injection III.8 Multiple Anchoring 80%
Systems
30%
III.11.4.18 Telecommunication
System
40%
60%
II.4 Production Lines / Injection Rigid
100% Modules
III.9 Installation and Integration
40%
II.5 Flow Ducts
95%
III.11.4.20 Field
Instrumentation
III.10 Pre-instalção and Hook-up
85% and Assembly
100% of Anchor Lines III.11.5 Construction
II.4 Others
II.7 Control System Submarine
40%
III.11 Process Plants, Moving
50% and Injection
50%
III.11.4.17 Automation
System
70%
III.11.4.19 Fiscal
Measurement System
Total Investments Development
50%
III - Logistics Support
15%
II.8 Basic Engineering
III.11.1 Basic Engineering50%
Total Exploration Expenditure
37%
II.9 Detailing Engineering
95%
III.11.2 Detailed Engineering
95%
II.10 Management, Construction and Assembly
60%
III.11.3 Service Management
90%
II.11 Other
75%
III.11.4 Materials
60%
60%
40%
95%
55%
Success Story
• Shipyard: local EPC suppliers invested in capacity expansion. 20% per
year increase vs. last decade
• Subsea: major suppliers invested in manufacturing capacity in Brazil
to meet increasing demand
• Technology: new research and development centers funded by the
Concessionaires
Shipyards
• Local EPCs - investing in capacity expansion
− 82k direct workforce;
− 324 constructions on going (vessels, rigs and PU)*
• Last decade – increase ≈ 20% per year since 2004
• Local content Requirements
− Attract foreign companies to establish locally
− Hull conversion/construction: internationally (Round 1-6) or domestically (Round 7-12)
• Main bottleneck: dry docks – only 3 in Brasil
• Challenges
− Overdependence on Petrobras
− Low productivity
− International competitiveness
Shipyards: Direct workforce progress*
Total
* Source: 2014 - Sinaval
2005
2006 2007 2008 2009 2010 2011 2012
2013 2014
14k
20k
78k
29k
33k
41k
56k
59k
62k
82k
Shipyards – cont’d
Brazilian shipyard
• 1980s: industry was
extinguished
• 2005+: the booming
offshore segment +
LC requirements =>
multiple shipyards
built
• Fully booked until
2016/17 with the
current backlog
• About half of existing
demand can be met
locally.
Shipyards backlog (CGT)
Techint
4%
1 module and
topside integration
FPSO P-76
6 drillships
EBR
4%
1 module and topside
integration
FPSO P-74
Inhaúma
2%
4 FPSO conversion hulls
(P-74 – P-77)
Enseada
4%
Mauá
5%
EAS
20%
8 Panamax
4 Product tankers
10 Suezmax, 8 Aframax
7 drillships
2 modules and
topside integration
FPSO P-67 and P-70
OSX
8%
2 modules and topside integration
FPSO P-75 and P-77
Brasfels
15%
3 modules and topside integration
FPSO Cidade de Itaguaí
FPSO P-66
FPSO P-69
QGI
8%
6 semisub rigs
2 modules and topside integration
FPSO Cidade de Maricá and Saquarema
Brasa
8%
3 drillships
Note: CGT = Compensated gross tonnage.
Source: IHS Energy
Jurong
12%
ERG
10%
7 FPSO newbuild hulls (P-67 – P-73)
7 drillships
2 modules and topside integration
FPSO P-68
FPSO P-71
© 2015 IHS
Subsea
Brazil current capacity—Christmas tree
• Subsea equipment and services
GE
7%
− Global industry leaders invest in local
manufacturing, bases and R&D
• Foreign companies plan to expand in
Brazil, seeking to win a share of this
growing market
Aker
21%
One
Subsea
37%
• New plants are being built
• Umbilicals remain a constraint
FMC
35%
Source: IHS Energy
© 2014 IHS
Technology Centers – Rio de Janeiro
• Operators of large fields must invest
in 1% of gross income in research and
development
• Main International companies are
establishing new R&D centers in
Brazil - Rio de Janeiro
− Total investment >US$ 270 million during
2010–2013
− Increase LC and technology transfer
− New technologies: waiver mechanism
Source: Parque Tecnológico UFRJ
Challenges
• Drilling rigs and services
• International competitiveness
• 2nd and 3rd level suppliers
• Frequency of licensing rounds
• Shipyard bottleneck
More than USD100 millions in fines have been issued so far
More to come
Move form penalty-based to incentive-based system
Flavia Craveiro
BP Brazil Local Content Lead
Brazilian Oil, Gas and Biofuel Institute (IBP) Local Content Committee Coordinator
[email protected]