Local content comes under the microscope

No U-turn: Petrobras chief executive Maria Das Gracas Foster

REUTERS/SCANPIX

By Gareth Chetwynd Rio de Janeiro

 16 August 2012 22:59 GMT

Brazil’s local content policies are coming under scrutiny as oil companies face fines for failing to meet their commitments to Brazilian regulators and state-controlled giant Petrobras grapples with its own bottlenecks among suppliers.

Local content commitments have been a mandatory element in Brazilian oil and gas concessions for almost a decade.

Minimum percentages for the purchase of local goods and services were introduced in the 2003 licensing round, when local content started to count in the scoring for bids.

Given this incentive, many companies confidently committed sky-high local content.

In 2004, for example, bidders promised that 87% of their spending would be done locally in the exploration phase.

The perception that this might not be realistic persuaded Brazilian regulators to intervene by introducing both a ceiling and a…

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