Meauring Local Content - Brazil, 2006

8/12/2019 Meauring Local Content - Brazil, 2006

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Global Local Content Summit forOil and Gas 2006

London, UK

Oswaldo A. Pedrosa Jr.

National Organization of thePetroleum Industry - Brazil

October 2006

Local Content Initiatives and

Measuring Tools in the BrazilianPetroleum Industry


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Attractiveness of the O&G Sector

The Oil & Gas Sector has to becompetitive internationally

Attractive resource bases upstream

Internal or regional market opportunities downstream

Adequate fiscal regimeStable and transparent rules


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Assurance of sufficient conditions toattract foreign investments

Internal economic constraint to develop theO&G Sector

Need to attract investments to compensatethe lack of domestic investment

Internal pressure to develop the local industry

for supplying the O&G projects

Trends on the development of

O&G Sector


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Potential for employment creation

37,100 jobs (direct, indirect, and income effect) pereach US$ 1 billion invested in O&G projects (*)

Local content = 55%

No. job creation as local content

Employment Creation

Case of Brazil

(*) 2001 UFRJ Study for ONIP


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Comparative Advantagesfor Buying Locally

Easy access of products and services

Use of local currency

Ease of after-sales services

Fast substitution of spare-parts

Use of local language

Simplified logisticsReliability in delivery time


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Local Industry Development

Size of the O&GSector

Existing TechnicalCapability

Local IndustryCapability

GovernmentalPolicies

Driving Forces forBuying Locally


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Other Companies

Investment Plan

(2007-2011)US$ 25 Billion

Upstream54%

Downstream31%

Corporate2%

Distribution3%

Gas andEnergy

10%

Petrobras

Investment Plan

(2007-2011)US$ 75 Billion

Upstream48%

Downstream36%

Gas and Energy

8%

Distribution8%

Size of the O&G Sector


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Technical Capability

Experience in engineering design andproduct development.

Human resources availability foroperation, engineering and management.

Incentive programs for R&D.


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Local Industry Capability

Well Established Local Industry

Experience in manufacturing products andserving the upstream and downstream

segments of the O&G Industry


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Equipments For Offshore Production Development

Wet Christmas Tree

BOP and Control Unit



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API, ASME/ANSI, DINSpecifications

150 to 5000 psiUp to 600C

P & T range

to 42Sizes

Standard steel, stainless steel, andsuperduplex steelMaterials

Manual, pneumatic, and electrical Actuato rs

Globe, ball, gate, and butterflyvalves, safety and control valvesTypes

Welded Steel Pipe Manufacturing

Product ion capacity: 2.1 millions tons per year(longitudinal and spiral welded pipes)

Size: up to 100 O.D.

Specifications: API 5L, API 2B, API 5CT, ASTM,NACE, DIN 2440, AWWA, BS1387


40 Manufacturers registered in ABIMAQ

Valves Manufacturing


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ISO 2858, ANSI B73.1, API 610, NFPA-20, API 614, API 682Specifications

Up to 15.000 HPCapacity

1 to 60Sizes

Standard steel, stainless steel, duplexand superduplex steelMaterials

Pressure, temperature, flow rate and

vibration

Monitoring /

Automati on

Centrifugal pumps and positivedisplacement pumpsTypes

38 Manufacturers registered in ABIMAQ


Pumps and Motor-Pumps

Drivers manufactured in Brazil:

Electric induction motors

Diesel motors (up to 500 HP)

Steam turbines

Pump Manufacturing


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Engineering Design Construction and Assembly

Equipment Manufacturing

Instrumentation and Control Technical Services

Modules forOffshore Top Side

Facilities


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Pressure vessels

Storage tanks

Reactors

Fired heaters

Boilers

Heat exchangers

(ASME and API Specifications)

Equipments for Processing Plants


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Size of the O&G

SectorExisting Technical

Capability





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Governmental Policies forLocal Industry Development

Requirements for buying locally

Local ContentCommitment

ANPs rules for localcontent commitment

PETROBRAS requirementsfor units construction

Primary objective Increase in localemployment and wealth

BNDES financingrequirements


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ANPs Rules for Local Content

Regulations establishing requirements forfull and fair opportunities for local suppliers

Local content commitment established in theConcession Agreement


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Requirements for Full and Fair Opportunities

for Local SuppliersNeed to include local suppliers in the vendors list

Provide same technical specifications for all suppliers

Accept equivalent specifications when applied

Require same delivery time for all suppliers

No preferential treatment to Affiliates

Get knowledge about the Brazilian industry capability

Require full and fair opportunities for local suppliers tosub-contractors



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Bid Round 1 to 4: Local content commitment: 15 % Signature bonus: 85%

Bid Round 5 and 6: Local content commitment: 40% Signature bonus: 30% Minimum Exploration Program: 30%

Bid Round 7: Local content commitment: 20% Signature bonus: 40% Minimum Exploration Program: 40%


Weighting Factors for Judging the Bids


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Industry perception on the local content regulation

Consequences:

Unfeasible to be effectively implemented

Potential for conflicts involving the players in the O&G Sector

Regulatory uncertainties affecting the attractiveness of the Brazilian O&G Sector

Highlyprescriptiveregulation

Enforcement actions not feasibleto be implemented because of

the lack of adequate legal framework

Local content requirementsestablished individually for

a large number of supply itemsin the E&P projects

High complexity of the rulesfor verifying

local content commitment

Current Situation


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Governmental Policies for


PROMINP Governmental Program for the Development of the

Brazilian Industry serving the O&G Sector Started in 2003 by the Ministry of Mines and Energy (MME) Coordinated by PETROBRAS

Participation of institutional representatives from the supplychain and from the operating companies

Objective

Maximize the participation of the Brazilian industry in supplyinggoods and services for the O&G projects in Brazil and overseas,on sustainable and competitive basis.


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Values of materials andequipments directly imported

by the main contractor ,including importation tax

Values of materials andequipments directly imported

by the oil company , includingimportation tax

Values of imported mats. andequipts. purchased by the

main contractor in the localmarket, excluding internal tax

Values of imported mats. andequips. purchased by the oilcompany in the local market,

excluding internal tax

Values of foreign servicesneeded for the project

X

Y = total value of the project, excluding internal tax

100 xYX

- 1 LC

= Metrics based on

ad valorem criterion

Check on values of imported components

Measuring Local Content


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Topside construct ionLC min = 60%

TG module construc tionLC min = 75%

Turbo generatorsLC = 0%

TC module construc tionLC min = 75%

Gas compressorsLC = 0%

Hull conversion

Usually LC = 0%

Measuring Local ContentPETROBRAS minimum requirements on local content

for production platform construction


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BNDES

Suppliers ofGoods and

Services

EPC PETROBRAS

Certifier

Auditor (ONIP)

Special Committee (PETROBRAS/BNDES)

Players in the Local Content Assessment



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Main Contractor

80,0Structure Integrator / Brazil

0,06,0

2,6

100,0 55,1

3,2

Compressors 6,2 0,0 0,0Manufacturer/Overseas

TC Module

2,9 85,0 2,5

Hull

0,0

Structure

Manufacturer/Overseas

Integrator / Brazil

Generators

11,2

Relative Part. (%) LC (%) Overall Content (%)

0,0 0,0

70,5 71,0 50,0Topside Yard / Brazil

TG Module

Yard / Overseas

Local Content Assessment forSemi-Submersible Platform



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Export ing System

FloatingProduction

Unit

Subsea

ProductionSystem

LC = wells LCwells + subsea LCsubsea + FPU LCFPU + exporting LCexporting

system relative participation on the overall field development expenditures

LCsyst local content of each system

Wells

Local Content of Offshore Field Development Project



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International Industry Best

Practices

Fiscal Regime Financing Capability

Exchange rate policy Technology updating

P r ice

De live ry tim eQu al ity

Impact on Industry Competitiveness


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Petroleum Industry

E&P

Refining

Transportation

Distribution

Universities andR&D Insti tutions

Governmental Agencies

Supply Chain ofGoods and

Services

FinancialInstitutions

Harmonical development of the Oil and Gas Cluster

All local institutions should benefit from the O&G projectsdevelopment in the country

Final Conclusion

Meauring Local Content - Brazil, 2006

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