A practical approach to local content


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How to achieve local content in Brazil is something that concerns most Norwegian companies in Brazil.

More than 100 people found their way to a seminar on local content this week, and that alone is a clear indication of how important local content is considered among Norwegians and their business partners in Brazil.

The seminar on October 28, 2013 was organized by Innovation Norway, the Consulate General in Rio de Janeiro, Intsok at the Norwegian Brazilian Chamber of commerce.

Marcelo Mafra (photo), responsible for local content at ANP, was invited to talk about how the government agency implement the local content policies. He explained how local content must be verified by a certified third party, and that ANP is working to prevent the requirements to adding cost and delaying a process for the companies bound by the requirements.

Since 2009, more than 33.400 local content certificates have been issues, representing more than 11 billion USD in local content.

Brazil currently has 880 concession agreements, more than 70 active operators, 3780 blocks, all with local content requirements. There are huge gaps in technology, human resources and infrastructure. According to Mr. Mafra more than 400 billion reais will be invested in the oil and gas sector the next few years, and the ANP wants to see a bigger share being spent in Brazil.

“How to increase the participation of the local supply chain is our challenge. To ANP it is important to discuss this with foreigners, with possible investors”, Mr. Mafra said.

Detailed documentation
DNV GL is certified by the ANP to verify local content and issue certificates, and Robertha Marques (photo) outlined how the certification process works.

“We analyze documentation, that is the buying and selling documents from the suppliers”, she explained and gave several practical examples, down to the smallest components in different equipments. There is for instance a difference between materials and goods, services, systems and packages.

Felipe Garcez, the local content coordinator at the Petrobras CEO´s office, talked about Petrobras’ local content strategy.

“Petrobras sees the local content policy as an opportunity, not an obligation, with potential gains for both oil companies and for the country. It is seen as a competitive advantage,”, he said.

To companies, a stronger local supply industry will reduce logistic risks and operating costs. To Brazil as a country, it will guarantee employment and sustainable economic growth. That is why Petrobras encourages the installation of foreign companies in Brazil and the association of domestic and foreign companies.

“Remember that to be considered a Brazilian company you need to have a manufacturing process and after sales services in Brazil, thus creating jobs and collecting taxes in the country. The owners and shareholders do not necessarily need to be Brazilian.”

Mr. Garcez considers international partnerships a key factor of success in the development of a competitive local industry, and says there is no way around the local content regime.

“It is important that you understand that this is happening already and the local content regime is important to fill the gaps in the industry. The challenges we face, forces us to be pioneers in the development of new technologies”, Mr. Garcez said.

Closing gaps
Several companies were invited to share their experiences on how they deal with the local content requirements.

Rafael Peixoto (photo) is the local content analyst at Statoil, and he said that Statoil delivered 52 percent of local content in the exploration phase of Peregrino, although the requirement was only 35.

He also talked about the different requirements in the different bidding rounds, and said the requirements are getting stricter with time.

The BM-C-47 block in the Statoil portfolio has a 55 percent local content requirement in the exploration phase and 65 percent in the development phase. On the blocks in the 11th round, that took place earlier this year, the requirements are 37 percent in the exploration phase and 65 percent in the development phase.

Statoil considers there will be gaps when it comes to find locally produced subsea equipment, production units and support vessels, but expects these gaps to be closing by 2020, even with a high local demand.

“We are working to get more local content on the topside agreements, and need spare parts in Brazil and service engineers to fix and reduce downtime. This is something that would help us save much more money than buying cheaper abroad”, Mr. Peixoto said.

Success stories
Laudezir Carvalho at IESA shared the experiences from a Brazilian EPC company. IESA works in joint ventures and consortia, and recently delivered the P-55 platform with 77 percent of local content. Four more platforms are under construction and IESA is also involved in the construction of the COMPERJ complex in Rio de Janeiro.

“We are starving for technology and know-how and you are welcome to join us and transfer technology to us. Through a joint venture with us you can come to Brazil and manufacture your product here. We have all the necessary certificates from Petrobras”, Mr. Carvalho said, in an invitation to Norwegian companies still considering the Brazilian market.

José Mauro Ferreira, commercial & marketing director at FMC Technologies, is also looking for potential business partners, and pointed to cooperation as a key.

“The first step to achieve local content is to start assembly in Brazil. To move to a higher level, you need engineering, you need to transfer knowledge to Brazilians. If the target is to move forward, engineering is a key factor, and we need to value local engineering”, he said.

Crane produces Palfinger Dreggen, former Bergen Group Dreggen, established in Brazil only 2 years ago and recently entered into a joint venture with Brazilian Koch. Now the company can produce their cranes locally and deliver the local content required by Brazilian authorities. The company was recently awarded a crane contract for 8 cranes to 7 drill ships being constructed at the Jurong shipyard, and is therefore considered a Norwegian success story.

“My first task was to find a local partner, and I’m really happy that I gave this priority from the beginning”, country president Suzana Barros said.

At the end of the day, Helle Moen (photo), director of Innovation Norway in Rio de Janeiro, and Adhemar Freire (photo, to the left), the local oil and gas adviser at Intsok, gave the closing remarks. Johnar Olsen (photo, in the middle) was the moderator of the event held at the J.W. Marriott hotel in Copacabana. The seminar was followed by a cocktail at the hotel roof top, to further digest the seminar discussions.

By Runa Hestmann Tierno, NBCC journalist