ABS Group - Doing Business in Brasil
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ABS Group Services do Brasil (ABS Consulting) hosts Doing Business in Brasil: Local Content Certification Seminar - December 6, 2011

ABS Group Services do Brasil (ABS Consulting) hosts Doing Business in Brasil: Local Content Certification Seminar - December 6, 2011

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ABS Group - Doing Business in Brasil ABS Group - Doing Business in Brasil Presentation Transcript

  • LOCAL CONTENT CERTIFICATION HOUSTON SEMINAR December 06, 2011
  • Brazilian Local Content Seminar:Agenda:8:00 - 9:00 AM Registration/Breakfast9:00 - 11:30 AM Presentation11:30 - 12:30 PM Question and Answers12:30 - 2:00 PM Closing Remarks and Lunch
  • Brazilian Oil & Gas Market: Highlights:• Brazil is the 7th largest oil consumer in the world and ranks the 41st in natural gas consumption.• 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)
  • Demand for Petroleum: Total Oil Consumption by Country (mmbo/d) 20.7 7.986 5.1 Brazil is world’s eighth-largest oil4 2.7 2.7 2.4 2.4 consumer 2.3 2.2 2.2 2.0 1.9 1.7 1.7 1.62 Total Oil Consumption mb/d (index)0 US France S. Korea Germany Mexico China Iran Japan India Canada Brazil Italy UK Russia Saudi 160 World OECD Brazil 150 140 Brazil oil consumption growing at 2.4% 130 per year. 120 110 OECD oil consumption growing at 1% 100 per year. 2003 2005 2007 2002 2004 2006 2001 2000 1998 1999 1991 1992 1994 1995 1990 1993 1996 1997 Source: Strategic Plan of Petrobras 4
  • Demand for Petroleum: Source: Strategic Plan of Petrobras 5
  • Strategic Plan of Investments:(Results of Bid Rounds) Source: ANP (2011) 6
  • Strategic Plan of Investments:(Petrobras Plan for 2010-2014) Source: Strategic Plan of Petrobras 7
  • Strategic Plan of Investments:(Major Oil Projects) Source: Strategic Plan Petrobras 8
  • Strategic Plan of Investments:(Pre-Salt Province) Pre-Salt Province Source: Strategic Plan Petrobras 9
  • Strategic Plan of Investments: 10
  • Strategic Plan of Investments:(Declared Investments Oct. 2011-US$) Bid 7 to 10 Total (10? US$) Local (10? US$) Local Certified (10?US$) Total 8,63 4,36 1,83 Source: ANP (Oct. 2011) 11
  • Local Content Purpose: “ The purpose of the local content (LC) requirement is to increase, on a competitive base, the share of the domestic manufacturers and service firms in the chain of suppliers for petroleum and natural gas. This policy foster growth of segments of domestic manufacturing companies, technological development of the country, training of local human resources and generates jobs and income.” Source: ANP 12
  • Context of the Government Policy: Participation of Brazilian Industry Sector PROMOTION Brazilian Training and Technology Development Income generation and employment in Brazil 13
  • Local Content Concept : What is Local Content? "Local Content” is the ratio of the value to goods produced and services rendered in the country to perform the contract and the total value of goods and services used for this purpose.“ Brazilian Cost of Goods and Services %LC = X 100 Sales Price of Goods and Services (Law Project 5938/2009 Contrato de Partilha de Produção) (Law 12.351/2010 - Production Sharing Contract) 14
  • Legal Framework: 1995 1997 Constitutional Law of Petroleum Amendment n.º 9 9.478/97 Flexibilization of “End of Petrobras Petrobras monopoly monopoly” ■ Principles and objectives of the National Energy Policy; ■ National Energy Policy Council (CNPE); ■ Creation of the ANP - National Petroleum Agency; ■ Establishment of concessions rules; ■ Establishment of bidding rounds; ■ Definition of government participation; ■ Definition of round ZERO for Petrobras; 15
  • Local Content on Bid Rounds: Bids 1 to 6: LC Calculation By Declaration From Bid 7: LC Calculation By 3rd part 16
  • Local Content on Bid 7 to 10:(% of Limits Minimum and Maximum) EXPLORATION PHASE DEVELOPMENT PHASE BLOCK LOCATION Minimum % Maximum % Minimum % Maximum % DEEP WATER 37 55 55 65 P ≥ 400m SHALLOW WATER 37 55 55 65 100m ≤ P < 400m SHALLOW WATER 51 60 63 70 P< 100m ONSHORE 70 80 77 85 17
  • Local Content on Bid 7 to 10:(Limits % Minimum and Maximum) Global Local Local Content Content By Item (By System) 18
  • Local Content Commitments on ConcessionAgreements: Source: ANP Presentation 19
  • Certifications Performed (Oct. 2011): 6524 Issued by ABSG 2636 Source: ANP 20
  • Scope – Concession Contracts: Production Phase Exploration Phase Stages Development Production SUBJECT TO NOT SUBJECT TO LC CERTIFICATION LOCAL CONTENT 21
  • Concession Contracts:(Contractual Requirements) Local Content Certification Required at the Concession Local Content Certification Required at the Concession Contract :: Contract “Clause 20.3: “Clause 20.3: The concessionary commitments related to the local acquisition of goods The concessionary commitments related to the local acquisition of goods and services will be confirmed to ANP via the submittal of aalocal content and services will be confirmed to ANP via the submittal of local content certificate.” certificate.” “Clause 20.4: “Clause 20.4: The concessionaries shall request to their goods and services vendors the The concessionaries shall request to their goods and services vendors the certificates of their products. Furthermore, the vendors can, by their own certificates of their products. Furthermore, the vendors can, by their own initiative, seek previous certification of their products.” initiative, seek previous certification of their products.” 22
  • Concession Contracts:(Contractual Requirements) “Clause 20.5: “Clause 20.5: The certification activities shall be developed by entities duly qualified and The certification activities shall be developed by entities duly qualified and acknowledged by ANP, based on criteria previously defined by the agency acknowledged by ANP, based on criteria previously defined by the agency itself.” itself.” “Clause 20.6: “Clause 20.6: ANP will implement a local content system and will perform periodic audits ANP will implement a local content system and will perform periodic audits on the qualified entities.” on the qualified entities.” 23
  • Range - Areas of Activity: Activity Area of Activity Area Code GE001 Geology and Geophysics PE001 Drilling Rigs PE002 Logistics and Operational Support PE003 Drilling, Completion and Evaluation of wells EN001 Basic and Detailed Engineering EN002 Management, Construction, Assembly and Comissioning EN003 Control, Instrumentation, Measurement and Electric Systems EN004 Telecommunication Systems ES001 Pipelines, Gas Lines and Storage Tanks ES002 Transfer Pumps UP001 Compression Units UP002 Power Generation Units UP003 Steam Generation and Injection UP004 Water Treatment and Injection ES003 Subsea Equipments and Controls: rigid and flexible lines, umbilicals and manifolds ES004 Monobuoys and Buoys UP005 Oil Processing and Treatment Systems UP006 Natural Gas Processing and Treatment Systems UP007 Ship Construction (hull, turret, other systems) UP008 Operational Safety EN005 Civil Construction and Utilities 24
  • ANP Regulations: ANP RESOLUTION # 36, Nov, 13, 2007: Approves the Regulation ANP # 6/2007, that defines the criteria and procedures for the development of the local content certification activities. ANP RESOLUTION # 37, Nov, 13, 2007: Approves the Regulation ANP # 7/2007, that defines the criteria and procedures for the registration and habilitation of Local Content Certification entities. ANP RESOLUTION # 38, Nov, 13, 2007: Approves the Regulation ANP # 8/2007, that defines the criteria and procedures for the auditing of local content of goods and services certification entities. ANP RESOLUTION # 39, Nov, 13, 2007: Approves the Regulation ANP # 9/2007, the sets the rules and the format for the submittal of the reports. TECHNICAL BULLETINS Nº 1 TO 27, INCLUDING Nº 12- Rev.01 Note: The Regulations can be found on the website of the ANP (www.anp.gov.br) by clicking “Local Content” on the right-hand side menu. 25
  • ANP Regulation # 36:(Purpose and Application) Applicable to the Concession contracts signed by ANP with the concessionaries effective from the 7th round on. Effective as of Sept. 11, 2008. Contracts signed BEFORE Sept. 11,2008 that have any type of change in price, term, or scope, under the way of a contractual addition dated after Sept. 11, 2008 shall be certified, provided there the concessionary needs to prove that there has been local investments. Supply scope involving goods and services, defined by service order or similar document, issued after Sept. 11, 2008, shall be certified, even if the associated mixed contract (umbrella) have been made effective before Sept. 11, 2008. 26
  • ANP Regulation # 36:(Purpose and Application) Goods stocked at the Concessionaire before Sept. 11, 2008 are not required to be certified. Sept, 11, 2008 For Goods stocked before Sept, 11, 2008 % LC is set by customer statement only. Used on Concessionaire Stock the project Investment Local Content ANP Report Statement. 27
  • Certification Activities/Concepts: A Services contract between the Contracting entity and the Certification entity shall be signed. Up to 30 days after the execution of above mentioned contract, the Certification entity shall inform to ANP the relevant information regarding what type of activity the goods, or the good for transient use, or the service, relate to. In order to perform its work, the certification entity must have access to all information necessary to the conduction and conclusion of the work. Totally imported items, without any local content, will not be certified. In case the supply has partial shipments, a global Certificate can be issued at the end of the supply. 28
  • Certification Activities/Concepts: Certification Authority Trimestral Auditing Certification Report Certificates Certificatio n Contract Certificates ANP Trim. Invest. Report Certification Contract Contract of Concession Contract of Supply Oil & Gas SUPPLIER Company Invoices & Certificates 29
  • Certification Activities/Concepts: For all standard serial item, and as long as there has not been any change in its specifications, composition or production process, and provided its local content certificate has not suffered changes of more than 10% (up or down), the original certification can be accepted during a maximum of a 4 year period. CL % VARIATION LESS THAN 10 % = ORIGINAL CERTIFICATE VALID FOR 4 ANOS NOTE: In this case the supplier must attach to each new invoice a copy of the original local content certificate, together with an statement that there has been no change on the product (good or service) since its original certification. Copy of Statement of Invoice + + Certificate “no changed” 30
  • Certification Activities/Concepts: The supplier can hire the certification of its products, regardless of to what concessionary will it be supplied. At the moment of delivery of the goods the supplier shall handle the invoice, together with the Certificate. COMMERCIAL TRANSACTION = INVOICE + LC CERTIFICATE In case of transfer of the good, goods for transient use or services, the certificate must be equally issued, and the local content indicator of the aforementioned goods will be transferred and used on the new concessionary local content account. All fiscal documents related to a commercial transaction, except those related to partial shipments, that are subject to local content certification, must be accompanied by the corresponding local content certificate for each item. 31
  • Certification Activities/Concepts: Goods or Services with LC equal or less than 10% will be considered as “totally imported”, i.e., with LC equal to ZERO. An exception is made for seismic data acquisition, leasing of drill ships for offshore projects and acquisition of bits. If LC ≤ 10%, then it will be = 0% Costs related to air tickets, lodging, food and similar, resulting from foreign labor (without permanent visa), are to be considered null in regards to measuring the LC, even when paid by companies located in Brazil. Local Labor: It is the labor proceeding from the employment of Brazilian citizens or foreigners with a permanent visa, hired on the service provider establishment , or in its sub-contractors, all duly inscribed at the Brazilian Register of Companies (CNPJ). 32
  • Certification Activities/Concepts: Goods manufactured abroad and later on nacionalized, will be considered imported for the purpose of LC. The criteria of origin takes place, and the LC Book has to be considered. A good manufactured in Brazil and later exported, when imported back to the country will only be considered applicable for LC purposes if it was certified before being exported. In case of goods for transient use, it is also necessary for the service provider to have CNPJ. On the contrary, the LC will be considered ZERO. In case of Repetro – fictitious exportation of goods manufactured in Brasil with later temporary admission (for example, leasing), the LC will be considered null. 33
  • Certification Activities/Concepts:Brazil Manufacture Owner - Foreign Country Operation In Brazil Company Imported Manufacture Company with Good CNPJ of good Imported Local Content Yes Exported Local Content Certificate Company without CNPJ Yes Local content 0% 34
  • Certification Activities/Concepts :(Good for Transiente Use) Main Outside Brazil Contract Client “B” Client “A” (Supplier) (Owner) Manufactured Contract Brazilian Subcontractor (Shipyard) Certification LC Certification Contract - Not Contract - YES Brazil Possible Certification Company Yes 35
  • Certification Activities/Concepts :(Exported and Imported Equipment) LC = 100% Exported Sales Price = R$ 50.000,00 + with LC LC = R$ Certificate 50.000,00 + LC = 18,86% Imported Local Content = R$ 50.000,00 Total Sales Price = R$ 265.000,00 Imported Part = R$ 215.000,00 Outside Brazil Brazil 36
  • Certification Activities/Concepts :(Local Indirect Expenses and Costs) How to deal with Local Overhead Costs associated with Administrative Support, and areas such as Finance, HR, Legal? How shall Local Licences such as IBAMA, ANP, CREA, etc., be considered ? How shall Local Expenditures with utilities such as water, light, telephone, etc. be considered ? How shall Local Expenses related to penalties be considered ? How shall Local Expenses associated with consulting in general, such as in finance, as well as expenses related to the judicial systems, such as processing fees ? How shall other Local Indirect Costs be considered? Local Indirect Local Costs and Expenses will be Considered as a “Contract Difference”. 37
  • Certification Activities/Concepts :(Local Indirect Expenses and Costs - Example) Sales Price National Cost Imported Cost Contract = + + Difference Example: IC = 250 CD = 50 SP = 1000 = NC = 700 + + Total NC = 700 + 50 %LC= X 100 = 75,0 % SP = 1000 38
  • Certification Activities/Concepts : The Anticipated Certification (without contract) is only possible when the object of certification is a Good. This concept of anticipated certification can not be applied to SERVICES. The issue of a Certificate for SERVICES is only possible under a contract between the service provider and its client, and there will be the need to issue one certificate for each service, even if the scope of the service is the same. The certification concept is valid for products, not for companies. The certification entities shall keep permanent records of all certificates issued. Each certificate and related documents that are part of the certification scope shall remain available for auditing for a period of 5 year. 39
  • Certification Activities/Concepts : Computers, monitors, notebooks, servers, and other information technology goods that can be used on services not exclusive or not predominant of the Oil & Gas industry will be measured by the simplified criteria, i. e., the origin of the GOOD is to be checked against the purchasing invoice documentation. Goods used for logistic services, such as vehicles, trucks, boats, helicopters, airplanes, cranes, winches, hoists, etc. – that can be said to be of non exclusive or non predominant use on the Oil & Gas industry, will have its LC evaluation done via the simplified method, i. e., the procedure of the GOOD shall be checked against the purchasing invoice documentation. This way the measurement of the components of the GOOD will not be required. Don´t need to open the Good and certify the components/items. 40
  • Certification Activities/Audits : The Certification entity is the sole responsible for the local content certificate information. Once issued, in no instance it will loose its validity for the purpose of local content assessment, except in proven cases of deceit or fraud. Criteria and procedure for the auditing of the certifying entities approved by ANP are set on Regulation # 8/2007 from ANP. The audits will be performed in the following instances:  When there is denunciation of irregularities.;  In order to verify the fulfilment of the “Warning term”;  In all contracts finalized by a certification entity that has been suspended;  At any time, under a Beginning of Audit Notification. Notes: (1) The certification entity is obliged to make available all the documentation defined on the work scope, as indicated on the Beginning of Audit Notification. (2) During the course of an audit, if the auditors believe it pertinent the “in loco” verification of any document, process, third party procedure, or even a raw material, component, part, equipment, machine or services, the Certification entity shall make these items available under a 10 days warning. 41
  • Certification Activities/Methodology :(Common Nomenclature Of Mercosul – NCM) NCM ≥ 84 All the goods, equipment or parts whose NCM ≥ 84 must have their LC Certified. For goods, equipment or parts whose NCM < 84, the LC is not required to be Certified. It will be measured by a Simplified Method and the LC will be 100% or 0%. NCM < 84 42
  • Certification Activities/Methodology :(Local Content of Goods - Clb)Clb is the % that corresponds to the ratio between: The difference betweenthe Total Sales Price (Vt) (excluding IPI and ICMS taxes) and the value of itsimported portion (Vi): % CLb = (1- Vi / Vt) . 100, where Vi = Vt – VnVi = Value of the Imported items (in R$) including raw material and adding:  Components imported directly by the manufacturer;  Components imported directly by the buyer;  Components imported by third parties and purchased locally by the manufacturer or buyer;  Part of imported components purchased locally by the manufacturer or buyer.Vn = Value of National components (in R$) .Vt = Sales Price of the Good (in R$), excluding IPI and ICMS taxes. 43
  • Certification Activities/Methodology :(Local Content of Goods for Transient Use - Cla)The Local Content of Goods for transient use (Cla) will be equivalent to theLocal Content of the Good under consideration (Clb) provided the companyperforming the service is registered on the Brazilian Registar of Companies(CNPJ). CLa(%) = CLb (%)The value of the National Content of this activity will be calculated using the% CLb of the good applied to the Contract Value (VC): National Content Value = CLb (%) x VCCLa = Local Content of the good under transient useVC= Value of the contract for the transient use of the good excluding IPI and ICMS taxes. 44
  • Certification Activities/Methodology :(Local Labor Utilization - ILs)% of the Local Content of services, including software, will be measured thruthe index of local labor utilization of the services (ILs). O (ILs) shall beapplied to the value of the contracted services, excluding ISS tax.The ILs % shall be calculated according to below formula, provided thecompany is register at the Brazilian Registar of Companies (CNPJ). ILs (%) = (CMN / CTM) x 100CTM = Total Cost of necessary or effectively used labor (excluding ISS Tax)CMN = Total Cost of National necessary of effectively used labor (excludingISS tax). 45
  • Certificate Template:The certificates are to be issued inPortuguese language and shall be codedaccording to the following rule: xxx – yy – zzzzzzzzzzzzzz– wwwxxx: ANP registration number of thecertification entity;yy: code of E&P activity area;zzzzzzzzzzzzzz: CNPJ number of thecompany for which the product wascertified;www: sequential number of thecertificate. 46
  • Local Content Calculation:(Example 1 - Good For Transient Use) 47
  • Local Content Calculation–Example 1:(Breakdown of Items) SUBSYSTEMS ITEMS Engine + BOP Components SYSTEM + + Hull, Structural parts Services and IntegatrionDrill Ship Unit + + Expenses Derrick + Processing Module & Mud Module + Azimuth Thruster 48
  • Local Content Calculation–Example 1: NATIONAL COST FOREIGN COST MEASUREMENT ITEM ORIGEN (R$) (R$) 1.0 Engine 1.1 Goods/Components Parts Imported 0,00 65.000.000,00 1.2 Services Imported 0,00 0,00 1.3 Expenses Nacional 15.500,00 0,00 2.0 BOP 2.1 Goods/Components Parts Imported 0,00 45.000.000,00 2.2 Services Imported 0,00 0,00 2.3 Expenses Nacional 6.500,00 0,00 3.0 Processing & Mud Modules 3.1 Goods/Components Parts Imp./Nacional 44.500.000,00 7.500.000,00 3.2 Services Nacional 11.125.000,00 0,00 3.3 Expenses Nacional 450.000,00 0,00 4.0 Riser Pipe 4.1 Goods/Components Parts Imp./Nacional 5.600.000,00 2.500.000,00 4.2 Services Nacional 1.680.000,00 0,00 4.3 Expenses Nacional 250.000,00 0,00 49
  • Local Content Calculation–Example 1: NATIONAL COST FOREIGN COST MEASUREMENT ITEM ORIGEN (R$) (R$) 5.0 Derrick 5.1 Goods/Components Parts Imp./Nacional 45.000.000,00 15.000.000,00 5.2 Services Nacional 13.500.000,00 0,00 5.3 Expenses Nacional 125.500,00 0,00 6.0 Azimuth Thruster 6.1 Goods/Components Parts Imported 0,00 35.000.000,00 6.2 Services Imported 0,00 0,00 6.3 Expenses Nacional 6.500,00 0,00 7.0 Knuckle Crane 7.1 Goods/Components Parts Imported 0,00 7.500.000,00 7.2 Services Nacional 350.000,00 0,00 7.3 Expenses Nacional 50.000,00 0,00 8.0 Hull & Structural Items 8.1 Goods/Components Parts Nacional 65.600.000,00 0,00 8.2 Services Nacional 19.680.000,00 0,00 8.3 Expenses Nacional 250.000,00 0,00 50
  • Local Content Calculation–Example 1: NATIONAL COST FOREIGN COST MEASUREMENT ITEM ORIGEN (R$) (R$) 9.0 Integration 9.1 Goods/Components Parts Nacional 35.600.000,00 0,00 9.2 Services Nacional 10.680.000,00 0,00 9.3 Expenses Nacional 250.000,00 0,00 10.0 TOTAL COST 10.1 Goods/Components Parts 196.300.000,00 177.500.000,00 10.2 Services 57.015.000,00 0,00 10.3 Expenses 1.404.000,00 0,00 National Cost (Nc) = R$ 254.719.000,00 Foreign Cost (Fc) = R$ 177.500.000,00 Sales Price (Sp) = R$ 560.000.000,00 51
  • Local Content Calculation–Example 1: Foreing Cost (Fc) %CLa = 1 - X 100 Sales Price (Sp) R$ 177.500.000,00 %CLa = 1- X 100 = 68,3% R$ 560.000.000,00 52
  • Local Content Calculation:(Example 2 – Charter Contract) Drilling Ship (1) = R$ 560 MM. Life Expectancy (2) = 25 years Year Rate = R$ 26 MM Daily Rate = 26 MM / 360 = R$ 72.222,00 National Cost = R$ 8.879.000,00 Utilization= 180 days CL = 68,30% Foreing Cost = Service´s Value = 180 x 72.222,00 R$ 4.121.000,00 = R$ 13.000.000,00 53
  • Local Content Calculation:(Example 2 – Charter Contract) Sales Price (Sp) = R$ 35.000.000,00 Foreing Cost (Fc) %CL = 1 - X 100 Sales Price (Sp) R$ 4.121.000,00 %CL = 1- X 100 = 82,2% R$ 35.000.000,00 54
  • Local Content Calculation:(Example 3 - Charter Contract with Services) TOTAL COST NATIONALCOST ITEMS FOREING COST (FC) WITHOUT TAXES (BC)MAN POWER INCLUDING ENGINEERING AND 2.013.058,00 198.852,00 1.814.206,00ONSHORE OPERATION SUPPORT (1)DRILLING SHIP – Charter Contract (2) 13.000.000,00 8.879.000,00 4.121.000,00SUPPLY BOAT – Charter Contract 5.250.000,00 1.575.000,00 3.675.000,00SPECIAL TOLLS 1.750.000,00 0,00 1.750.000,00CATERING 350.000,00 350.000,00 0,00CHEMICAL AND LUBRIFICANTS 1.500.000,00 1.500.000,00 0,00SPARE PARTS 550.000,00 550.000,00 0,00TOTAL COST (1) 24.413.058,00 13.052.852,00 11.360.206,00SALES PRICE (2) 38.500.000,00CONTRACT DIFFERENCE (2) - (1) 14.086.942,00 0,00TOTAL FINAL COSTS 38.500.000,00 27.139.794,00 11.360.206,00CONTEÚDO LOCAL = CN / PV 70,49% 55
  • Penalty (Example):Offered Local Content = 60%Committed Total Investment – IT (Exploration Phase) = R$ 100 millionCommitted National Investment = 60% x R$ 100 million = R$ 60 millionDone Local Content = 40%Local Content not met (NR %) = 20%, equivalent to 33% of the committed rateof 60% 33,33% 33,33% Penalty (M)= 60% 56
  • Penalty (Example): Local Investment not Realized (INR): INR = ∆CL x IT = 20% x US$ 100 Million = US$ 20 Million Amount of Penalty (VM): VM = M x INR = 60% x US$ 20 Million = US$ 12 Million Conclusion: The amount of fine (penalty) is US$ 12 Million, equivalent to 12% of the total amount invested in the contract. 57
  • How to Implement a Sucessful LC Program: Selecting and preparing staff and the internal organization for the Local Content rules (ANP); Implement a consistent training program with the Certification Authority assistance if necessary. Making Partnership and cooperation with local companies. Setting production units in Brazil. Increasing the participation of local labor on services. Obtaining local content certification on goods and services. Expand the dialog and interaction with the suppliers building a strong relationship capable of facing controversial issues. 58
  • Local Content Challenges:(Local Content Regulation by ANP: 11th Bid Round & Pre-SaltBid Round) Simplification the table of commitments and offers of Local Content. Adjust the definitions of items of the Local Content commitments (Resolution Nº 39/2007 ANP). Simplify the procedures for Local Content Certification, giving focus on the relevant activities. (Resolution Nº 36/2007 ANP). Transparency of actions. Dialogue with the industry. Increase the volume of Local investments (certifications). Inform the market about certification process and its rules. Source: ANP 59
  • Brazilian Local Content Tendency:(Opportunities & Risks) Brazil is the biggest exploratory opportunity in the world. Brazilian petroleum sector is an extraordinary (worldwide) business opportunity for petroleum companies and for goods & services suppliers. ANP will promote the 11º Bid Round in a short time. ANP is working to promote the 1st Bid Round focusing Pre-salt opportunities. The Brazilian policy for the O&G sector aims to reach a strong degree of nationalization and boost the Brazilian industry. Current investments in the supply chain have sufficient magnitude to induce the local industry. Source: ANP 60
  • Brazilian Local Content Tendency:(Opportunities & Risks) According to Brazilian Policy foreign investments are welcome. Automobilist Industry is now required to attend as a Minimum 60% of Local Content. There is a tendency to have soon a minimum Local Content indice required for O&G production, refinery and mining. There is the risk of the supplier does not reach the compromised LC level. In this case, a penalty may be applied. If the penalties happens in a systematic way, supllier´s position in the market may also be affected. 61
  • Local Content Around the World: • Angola • Líbia • Azerbaijão • Malasia • Brasil • Nigéria • China • Noruega • Egito • Papua Nova Guiné • Guine Equatorial • Rússia • Inglaterra • Trinidad • Irã • Venezuela • Kazaquistão • Yemen 62
  • Contacts in Brazil: Contacts in Houston: Eugenio Singer  Henrique Paula esinger@absconsulting.com hpaula@absconsulting.com Tel. 021-3232.1730 / 91829026 Ph: 281 673-2864 / 713 859-9682 Alcides Costa  Greg Jandjel acosta@absconsulting.com gJandjel@absconsulting.com Tel. 021-3232.1758 / 9912.9694 Ph: 281 673-2781 / 832 969-6767 Thereza Moreira tmoreira@absconsulting.com Tel.021-3232.1706 Contato@absconsulting.com Tel. 021-3232.1700 www.absconsulting.com.br  www.absconsulting.com 63