Abstract

This paper addresses the economic impact of delays in oil project schedule and local content requirements. It also presents the main features of the Brazilian Local Content Policy, evolving its legal fundaments, the main process and its consequences on the offshore projects investments. In addition it presents the local content definition processes, as well some aspects of the measurement methodology and the certification requirement. Some findings show that the certification process is complex and costly for local suppliers. At the end, a cash flow model is used to evaluate impacts on economics of offshore projects from changing in local content levels and project startup time.

Introduction

Potential investors in oil industry or supply chain industry look for understand risks and opportunities before investing. The Brazilian Local Content Policy for Oil and Gas Industry is an active industrial policy which involves a market reserve. It can add risks to Brazilian business environment, but, there are many investments opportunities in the country, which can compensate these risks. In Brazil, the demand of goods and services trend to keep increasing while the Local Content Policy is getting more important over the time. So, operators and suppliers should be able to deal with the costs and benefits of this policy, clearly focused in internal economic development, beyond the oil and gas industry investment optimization. In that context, this paper addresses the main legal fundaments of the Brazilian Local Content Policy, its main process and some of its consequences for offshore projects investments.

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