The ANP today submits the resolution draft that deals with the obligation exemption, percentage adjustments and transfers of surplus local content (see the consultation in portuguese here) in public consultation. These forecasts, which are contained in the contracts since the 7th Bidding Round, were still pending regulation by the Agency.

In addition to the regulation of the exemption request, the possibility of signing a contractual addendum to adopt the same local content rules approved for the next rounds of bidding was included. This is being proposed with the aim of regulating the issue for the benefit of society and unlocking investments to increase the collection and contracting of goods and services with the national industry as soon as possible. With indexes more in line with the current supply chain of goods and services in Brazil, there will be more flexibility to fulfill obligations.

Thus, according to the proposed regulation, companies may choose to retain the original terms of their contracts, in which case waivers may not have an impact on overall local content commitments and fines methodology, or Base on regulatory evolution, adhere to the new model.

The proposed regulatory evolution aims to offer oil and gas companies an alternative to comply with local content obligations. It is believed that the option for the new model can unlock investments, encouraging hiring with local suppliers in the short term. It is important to emphasize, however, that in the event of non-compliance fines are imposed, without the possibility of waiver.

In the medium term, the resumption of projects in progress and the start of investments resulting from the new bidding rounds will allow the emergence of a new stage of growth with greater contracting with the country's supply chain, fostering a positive cycle of job creation and Increased collection.

The interruption of the rounds for five years coincided with the fall in the price of oil, the reduction of Petrobras' investments and difficulties in complying with local content rules established after 2005. The effect on the level of activity was great. In 2012, the number of exploratory wells reached 232, resulting in 173 oil discoveries. So far in 2017, only seven perforations have been completed, with seven discoveries.

The measures taken to resume activity, such as the end of Petrobras' obligation to be the sole operator in the pre-salt, the auction calendar, the revision of the local content model and the new exploration and production policy, should bring good news for The sector in the medium and long term. However, it is necessary to attract investment in the short term. According to information disclosed by the concessionaires to the ANP, there are projects to increase production planned for the period between 2017 and 2021 that can generate investments of around R $ 240 billion and the installation of 20 offshore platforms, in addition to the drilling of more than 900 wells, 300 at sea.

Among the causes that are slowing down some of these projects, we highlight the high risk perception of the concessionaires in relation to the compliance with the current levels of contracted local content. In the case of concession contracts, hiring at higher prices impacts the tax revenues, as they reduce the taxes paid by the concessionaires. In the sharing contracts, applicable to the pre-salt, the situation is more complex. In addition to taxes, there is the question of the cost in oil, through which the Union shares, together with the companies, the costs of operations. The higher the cost of oil, the lower the share of production that is the responsibility of the Union. As a result, hiring at higher prices is also borne by society, to a greater extent in pre-salt contracts.

Another relevant issue is the postponement of projects. When this occurs, royalties, other government contributions and taxes are no longer collected. The State, which accounts for the lion's share of oil and natural gas production projects, accounting for 75 percent of the total, loses much more than companies. It is R $ 2.6 billion in deferred tax revenues for each year of delay in the production input of a 150,000 bpd platform, such as the pre-salt. Losses with the potential to reach tens of billions of reais per year for all the platforms planned to come on stream in the coming years. Recipes that, from a practical point of view, will never be recovered.

It is important to seek the highest level of local hiring possible, generating jobs and wealth in Brazil. But this will only happen if operators decide to invest. It is in this sense that the ANP has been acting, seeking to reduce the uncertainties that will increase the level of activity in the country's exploration and production sector. The possibility of reviewing a model that has produced high fines, waivers and lawsuits that have resulted in project delays is yet another step the Agency has taken in this direction.