Signs of compromise as Pedefor committee set to meet

There were signs of a local content compromise emerging in Brazil this week at government level, brokered by the office of the presidential chief of staff Eliseu Padilha.

A new Pedefor committee meeting was expected as Upstream went to press, as Mines & Energy Minister Fernando Coelho Filho told reporters that there was an improving dialogue around a solution that works.

“It is important to find the way that brings the investments for sustainable, long term growth... Brazil has to be on the radar of the big exploration and production companies,” he stated, adding that the country’s licensing rounds also need to be more predictable.

Sources hinted at a possible compromise involving just two categories of local content, each with their own percentage requirement.

Another possible area of compromise concerned a demand, by industry associates, to exclude activities with the lowest incremental value from local content calculations, such as catering and security services.

Such claims address an important point, but miss the mark, Kupfer argued. “The debate is focused on how much local content can be sacrificed in the name of efficency, but there is not enough focus on how to foster local innovation. This is the real gap,” he said.

Abespetro, representing service companies, has argued for a 1% royalty levy that is currently earmarked for “pure” research and development investments to be made available for practical application in real projects, thus giving this category a more prominent role in meeting local content requirements.