The impact and effectiveness of local content policy on oil exploration and production in Brazil

de Almeida, E; Martinez-Prieto, D

Journal article

The impact and effectiveness of local content policy on oil exploration and production in Brazil

Abstract:: Local content policy plays a fundamental role for Brazil. It is through local content policy that the country is seeking to reconcile expansion of the oil sector with its industrial development. Despite the significant evolution of this policy in recent years, several improvements are needed to balance the objectives of promoting industrialization with the competitiveness of oil exploration and production activity in Brazil. Local content policies have an important positive impact on Brazilian industries, particularly the Brazilian shipbuilding industry. At the same time, local content commitments currently represent an important risk factor for exploration and production (E&P;) projects in Brazil. The local content commitments are assumed long before the acquisition of product and services for the projects. The risk of cost overruns, delays, and low quality of products is a key consequence of the existing policy, affecting the attractiveness of Brazil’s oil and gas industry. There is a clear space to introduce adjustments in local content policy in Brazil, in order to reduce the potential risks for E&P; projects, while still supporting industrialization in Brazil. For future projects, allowing greater flexibility to adjust local content commitments as development plans are established would help reduce project risks. Shifting from an approach that penalizes non-compliance to one that rewards operators who exceed commitments would likely represent a more effective incentive structure. For contracts already signed that are unable to meet local content requirements, there is a range of pragmatic adjustments that could be considered in addition to those already mentioned.

Publication status:: Published

Peer review status:: Peer reviewed

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APA Style

de Almeida, E., & Martinez-Prieto, D. (2015). The impact and effectiveness of local content policy on oil exploration and production in Brazil. Oxford Energy Forum, 98, 28–30.

MLA Style

de Almeida, E, and D Martinez-Prieto. “The Impact and Effectiveness of Local Content Policy on Oil Exploration and Production in Brazil.” Oxford Energy Forum, no. 98, 2015, pp. 28–30.

Chicago Style

Almeida, E de, and D Martinez-Prieto. 2015. “The Impact and Effectiveness of Local Content Policy on Oil Exploration and Production in Brazil.” Oxford Energy Forum, no. 98: 28–30.
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