3 lessons for Brazil’s energy sector


With the aim of becoming the 8th largest oil nation in the world by 2020, Brazil’s energy industry is certainly on the rise.

brazil energy

A presentation by Miguel Gradin of Graal Energia, gave delegates at HSBC’s International Exchange to Brazil some invaluable insight to the country’s oil and gas industry.

Be prepared to work to the Petrobras timetable

Petrobras’ five-year business plan for 2012-2016 was a cornerstone of the presentation with its projected investments of US$236.5bn highlighting the influence it wields in Brazil’s energy industry.

 “Thepresentation about Brazil's energy industry was extremely informative and clearly set out the implications of Petrobras’ five-year plan,” says Bill Main of Aberdeen-based Balmoral Offshore Engineering, which produces buoyancy products for deep-water drilling.

“The targets for growth are still ambitious but the timetable has moved out and production is likely to slow down. Importantly, though, we now have a clearer idea of when things are going to happen. From our point of view, meetings that we’ve been pushing for are now becoming available to us.”

Local content is king

With plans to set up a greenfield site in Vitoria, 250 miles north of Rio de Janeiro, Bill is well aware of the importance of local content in Brazil.

“Brazil’s current president developed the concept of local content so it is highly unlikely that the government will move away from it to speed up production,” explains Bill.

The importance of local content was evident in the presentation when a question around whether the government would relax the rules and bring in overseas resources to speed up oil and gas production was answered with a resounding ‘no’.

“I believe they would rather produce less while maintaining levels of local content than produce more with overseas support,” says Bill.”

“The government doesn’t just want an oil and gas exporting industry, it wants to build the country’s infrastructure and production capacity so the value-added work is done in Brazil by Brazilians.”

Take your calculator

“With local content being the cornerstone, we know we need to have an operation in Brazil, it’s just a matter of timing. Getting the details on Petrobras’ five-year plan has given us a clearer idea of that,” says Bill.

Having accepted the implications of local content, the challenge is to work within the complicated rules.

“It’s not just about providing evidence about what you’re making. You also need certificates confirming the percentage of local content in any materials supplied you use,” explains Bill.

“Having a local production facility and employing a local workforce will help but it is still vital to keep accurate records of all materials to ensure that you comply with the rules.”


References

Strategies:

Key points

  • Petrobas has a huge influence over the Oil & Gas Industry in Brazil
  • Brazilian government is seeking to grow locally based oil and gas sector
  • Certification of local content is required
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