Contractual commitment of purchasing local goods and services in competitive basis. LC represents 20% of the final score Bonus represents 40% Minimum Exploratory Program represents 40% LC offering applied on the 20 th clause of the concession agreement.
Contractual commitment of purchasing local goods and services in competitive basis. LC represents 20% of the final score Bonus represents 40% Minimum Exploratory Program represents 40% LC offering applied on the 20 th clause of the concession agreement.
Contractual commitment of purchasing local goods and services in competitive basis. LC represents 20% of the final score Bonus represents 40% Minimum Exploratory Program represents 40% LC offering applied on the 20 th clause of the concession agreement.
Challenges and Opportunities for E&P Sector Highlights Br azi l Area: 8,514,876 km Population: 190 million GDP: U$ 3.5 trillion Worlds seventh largest economy Political, Economical and stability Over US$ 306 billion in International Reserves Investment grade (Moodys, Fitch and Standard and Poors) Oil, Natural Gas and Biofuels regulated under the same institutional environment (ANP) highlights: Br azi l i an Oi l & Gas Mar ket Mature & democratic State Economic stability Solid regulations environment: Successful & strong concession agreements Pre-salt fields More than 70 active operators More than 3500 blocks offered & 730 concession agreements Lots of gaps (technology, HR, infrastructure, etc) To be c onsi der ed... To be c onsi der ed... Contractual commitment of purchasing local goods and services in competitive basis. Definition: What i s Loc al Cont ent ? And w hy? Development of local suppliers & technology Mass creation of jobs Development of the economy (GDP) Objectives: Bids 1 to 4 Free LC offerings LC declared by suppIiers Loc al Cont ent Fr amewor k : t he Conc essi on ex per i enc e Bids 5 and 6 Minimum offering limits LC still declared by suppIiers Bids 7 to 10 Max. & Min. offering limits LC Certification by 3 rd part New methodology to calculate the LC Local Content was requiredin all Bid Rounds 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Local Content Offerings 40% MEP 40% Bonus Local Content represents 20% of the final score Bonus represents 40% Minimum Exploratory Program represents 40% LC offering applied on the 20 th clause of the concession agreement LC Certificates only way to prove local investments At the BidRound 20% Local Content Local Investments Certification (by a 3 rd party) The on going Local Content process The concession contracts set the local content commitment for the exploratory and development phases Concessionaires Local goods & services acquisition ANP monitoring and auditing the contractual local content requirements Loc al Cont ent Fr amewor k : t he Conc essi on ex per i enc e Loc al Cont ent Commi t ment s on Conc essi on Agr eement s * Only on-shore blocks 0 10 20 30 40 50 60 70 80 90 100 1900ral 1900ral 1900ral 1900ral 1900ral 1900ral 1900ral 1900ral 1900ral 1900ral E xploration Development Local Content Average BID ROUND L o c a l
C o n t e n t O f f e r i n g s ( % ) * Pre-salt fields Loc al Cont ent Fr amewor k : t he Conc essi on ex per i enc e Concession Agreement: 20 th clause - LC terms Include local suppliers in the companies invited to submit proposal. Ensure to local suppliers equal and adequate time to present proposals in accordance with Best Practices of Oil Industry. Do not require technical qualifications or certifications from local suppliers besides those required from foreign suppliers Keep tracking local suppliers and look for updated information of local supply chain at trade associations and entities (ONIP). Loc al Cont ent Fr amewor k : t he Conc essi on ex per i enc e Concession Agreement: 20 th clause - LC Certification Concessionaires LC commitment shall be proved to ANP by the presentation of LC Certification. Concessionaire must request to suppliers the certifications of their goods & services. Suppliers may previously provide, at its own initiative, the LC Certification of their goods & services. Activities of LC Certification shall be performed only by entities accredited by ANP. ANP shall the monitor the LC certification process and shall audit the accredited certification entities. Loc al Cont ent Fr amewor k : t he Conc essi on ex per i enc e Concession agreement: 20 th clause - LC Waivers In case local market presents: 1) Excessively high prices, 2) Higher delivery time, 3) No technolgy Concessionaires must request previously to ANP the authorization to order goods and services abroad. Besides the exceptionally given by the waive, the global LC commitment originally bided for exploration phase and development of production stage remains the same. Fees will be applied in case of non compliance of LC terms established at the concession agreement. Loc al Cont ent Audi t i ng Check the accomplishment of contractual Local Content requirements Penalties when contract terms were not completely accomplished. Contractual fees can be very high. It is calculate as a proportion between the investment and the LC that has not been achieved. Procedures: Loc al Cont ent Fr amewor k : LC Cer t i f i c at i on LC Certification: Resolution ANP no 36/2007 Applied on Concession Agreements from 7 th Bid up to 10 th Bid: Establishes the criteria and procedures for the execution of activities of Local Content Certification and: The Cartilha de Contedo Local (Local Content Primer) as the official tool of measurement of LC (goods, services, systems and goods of temporary use). The Quarterly Certification Report. The LC Certificate. Loc al Cont ent Fr amewor k : LC Cer t i f i c at i on LC Certification: Resolution ANP no 37, 38 & 39/2007 Applied on Concession Agreements from 7 th Bid up to 10 th Bid: Resolution ANP no 37/2007: establishes the criteria and procedures for accreditation of LC certification companies. Resolution ANP no 38/2007: establishes the procedures of auditing the LC certification companies. Resolution ANP no 39/2007: establishes the Quarterly Investments Report where concessionaires declares all the investments done (local and imported) 2008 2007 2006 2005 Bids 7 to 10 LC calculation: 3rd part (companies accredited by ANP) Compulsory certification to prove local investments How t o per f or m LC measur ement ? GOODS Formula X = price of all imported components Y = Product sell price
X Y CLb = 1 - * 100 Ex pl or at i on Phase - I nvest i ment os Loc ai s Decl ar ados BID DeclaredInvestments Total(US$) Local(US$) BID07 5.398.380.300,00 2.618.064.820,00 BID09 3.128.999.770,00 1.653.063.110,00 BID10 100.926.090,00 94.090.920,00 Total 8.628.306.160,00 4.365.218.860,00 BID DeclaredInvestments Total(US$) Local(US$) BID01 3.479.599.410,00 2.127.583.540,00 BID02 6.598.373.310,00 5.102.746.010,00 BID03 4.324.914.790,00 3.125.431.990,00 BID04 2.281.731.490,00 1.859.232.350,00 BID05 1.776.193.510,00 1.020.633.060,00 BID06 4.419.411.810,00 3.193.016.600,00 Total 22.880.224.310,00 16.428.643.560,00 FromBid1toBid10 morethenUS$30 billionofinvestments attheExploration phase.US$20billion declaredaslocal investment. UnderLCcertification framework LC Cer t i f i c at i on i n number s Descrio dasreas TotalInvestments (US$) LocalInvestments (US$) Certificates Issued Geology&Geophysics 509.011.799,03 328.829.021,95 830 Drillingrigs 87.982.667,60 38.159.445,91 108 Logisticsand operationalsupport 1.059.027.366,53 747.455.739,02 1.422 Well drilling,Completionand Assesment 231.118.544,24 196.350.967,26 1.784 Basic engineeringansDetailing 6.488.363,77 6.055.066,47 21 Management, Construction,Assembly&Comissioning 7.830.713,54 7.044.224,51 50 Electrical,Control,Instruments&MeasurementSystems 3.659.729,94 3.604.943,09 162 TelecommSystems 144.087,94 142.976,63 5 Oil &GsPipelines,StorageTanks 1.037.960,33 795.894,89 71 Compression Units 3.654.154,78 3.000.205,26 24 SteamGenerationandInjectionUnits 1.851,65 1.834,24 2 SubseaEquipmentsandControlSystems 538.261,73 338.853,33 15 Oil ProcessingandTreatmentSystems 2.357.937,74 2.035.274,59 14 Natural GasProcessingandTreatmentSystems 7.065,43 7.065,43 2 Platform andShipBuilding (hull,turret,anchorsystms) 43.360.210,73 27.561.176,13 5 HSSE 16.331.123,13 14.649.155,68 177 Civil worksandUtilities 18.738.874,40 18.440.296,52 82 Total 1.991.290.712,50 1.394.472.140,89 4.774 LC Cer t i f i c at i on i n number s 1900ral 1901ral 1902ral 1904ral 1905ral 1906ral 1908ral 1909ral 1910ral 1912ral 1913ral 2009.I 2009.II 2009.III 2009.IV 2010.I 2010.II 2010.III 2010.IV 2011.I 2011.II LCCertificatesissuedoneachquarter TotalLCCertificatesissued The Pr e-Sal t as a New Par adi gm 2-ANP-2A-RJ S 2-ANP-1-RJ S Brazildeepwateroil productionisabout25%of theglobaloilproduction. Presaltnewprovinceshall increasethispercentage significantly. IfproventhewayANPforecasted, Brazilshallneedtoinvestheavilyin infrastructure(platforms,pipelines, oilpipelines,ports,vessels,ships, drillingrigs,steel,etc.). Competitiveness Supply capacity Goods & services - Costs in Brazil Local suppliers: Technology Human Resources Overcome Setbacks: Campos & Sant os Pr e-sal t : c hal l enges of l oc al suppl y Strong currency (Real) Importations boom Economy: Loc al Cont ent Per spec t i ves Art. 9... I - the pace of blocks acquisition under the production sharing system will observe the energy policy and the development of national industry and the its ability to supply goods and services Law n 12.351/ 2010 ProductionSharingAgreement: Focus on the methodology to calculate LC (LC Promer) Focus on the LC Certification Local Content Policy: Simplify the number of LC requirements giving focus on relevant activities; Simplify the procedures of Local Content Certification, giving focus on relevant activities. (Resolution No. 36/2007 ANP) - LC Certification Forum; Use LC data to drive R&D investments; Transparency of actions; Dialogue with the industry. Loc al Cont ent Chal l enges f or nex t Bi ddi ng Rounds Local Content Regulation Challenges: How t o i nc r ease Loc al Cont ent l evel s? Partnership and cooperation with local companies; Install production units in Brazil; Increase the share of local professionals on services; Obtain local content certification on goods and services. Suggestions: Agnc i a Nac i onal do Pet r l eo, Gs Nat ur al e Bi oc ombust vei s - ANP Coor denador i a de Cont edo Loc al (CCL) Marcelo Mafra Borges de Macedo Av. Rio Branco, 65 - 17 andar - Rio de J aneiro RJ Brasil Tel.: (55 21) 2112-8550 / (55 21) 2112-8535 mmacedo@anp.gov.br ccl@anp.gov.br www.anp.gov.br