The Federal Government announced on Wednesday (22/02) the changes in the minimum percentages of local content (CL) for oil and natural gas production and exploration companies in Brazil. The reduction of these percentages and calculation of global form or macro segments, and no longer to each item, has the purpose of invigorating the investments in the country, improving the business environment in this sector.

The average reduction in the percentages of minimum local content is about 50% and will already be valid for the bidding rounds that will be held this year and did not yet have specific rules (2nd Round of Production Sharing). The new percentages reconcile the interests of the national industry and also allow the attraction of national and international investments to Brazil, generating income and employment and moving the economy.

"With this measure, we are enabling the rounds that will happen throughout the year 2017, 2018 and from now on, be made from that base. This will bring opportunities to a number of foreign and domestic companies that explore and produce oil in Brazil, having a minimum mandatory percentage that is completely feasible at competitive prices by Brazilian industries, "said Mines and Energy Minister Fernando Coelho Filho.

The minister announced, after meeting with representatives of the Ministry of Finance, Civil House, Planning, and Industry, Foreign Trade and Services, that the new percentages of Local Content are as follows:

Land Areas: Exploration: 50%; Production: 50%

Maritime Areas: Exploration: 18%; Well construction: 25%; Collection and drainage systems: 40%; Stationary Production Units (UEP): 25%

The new percentages have been defined by consensus among the ministries and will now be submitted to the management committee of the Program to Encourage Productive Chain Competitiveness, Development and Improvement of Suppliers of the Oil and Natural Gas Sector (PEDEFOR). The new rules will be assessed by the National Energy Policy Council (CNPE), in a possible extraordinary meeting, to be held in March.

The reduction of percentages and their calculation of global and macro segments should help to avoid the discussion about compliance with LC, which in some cases ends up generating judicialization, creating uncertainty for investors and ceasing to be collected. According to Fernando Coelho Filho, the new, more realistic percentages also mean that waiver applications, or pardon of punishments for noncompliance with minimum LC by oil companies, do not apply.

"The government understood that better than the legal dispute is a percentage of local content more realistic, that becomes the tip in jobs and opportunity of generation of income for the Brazilian population. With equipment produced in Brazil and services made in Brazil to help us extract our wealth, generating foreign exchange and opportunities for the country, "said Coelho Filho.

Fines over the mandatory percentages of local content that are not met by the industry have also been reduced, from a minimum of 60% of what was not achieved by the oil companies to 40%, and from a ceiling of 100% to a new 75% in Cases of non-payment of fines.

Also, will be finalized by the PEDEFOR committee initiatives for the development of the national industry of the sector. Among these measures is the redistribution of the resources of Research and Development of the Sector (R & D) and modernizations in the program of development of suppliers.