The concession contracts for exploration, development and production of oil and natural gas, signed by the ANP with the winning companies in the bidding rounds, include the Local Content Clause, which focuses on the stages of exploration and production development.
According to this clause, established by the ANP, concession holders must ensure preference in contracting Brazilian suppliers whenever their offerings present price, delivery time and quality equivalent to those of other suppliers also invited to submit proposals.
This contractual provision aims to increase participation of the national industry of goods and services, on a competitive basis, in exploration and production development projects of oil and natural gas. The expected result of implementing the clause is the boost of technological development, training of human resources, and the generation of employment and income in this segment.
The Local Content Certification System
In order to establish the legal conditions for carrying out the procedures related to the requirements of the local content clause, introduced from the Seventh Round, the ANP created the Local Content Certification System, whose regulation was published on November 16, 2007, after completion of the public consultation process.
This system establishes the methodology for certification and the rules for accreditation of certification bodies by the ANP. Accredited bodies will be responsible for measuring and reporting to the ANP the local content of goods and services contracted by concession holders for activities of exploration and production development of oil and natural gas.
The resolutions that make up the certification system can be accessed in the Legislation menu, below.
History of Local Content in the ANP
The ANP applies the concept of local content since the First Bidding Round of Blocks for Exploration and Production of Oil and Natural Gas, which took place in 1999, through the Local Content Clause in Concession Agreements. At that time, competitors could freely offer values of goods and services to be purchased from Brazilian companies to carry out the activities of exploration and production development.
Local Content percentages offered by competing companies counted for scoring purposes in the offers for acquisition of blocks. This commitment model remained in force until the Fourth Bidding Round.
In the Fifth and Sixth rounds, the Local Content Clause in Concession Contracts was modified, and began to require minimum and differentiated percentages for the purchase of Brazilian goods and services intended for onshore blocks and offshore blocks located in shallow and deep waters.
In the Seventh Bidding Round, other changes were introduced in the Local Content Clause, which began to limit the local content offers to percentage ranges situated between minimum and maximum values. It also established a spreadsheet containing items and sub-items for both the exploration and the development stages, where the bidding company could allocate weights and percentages of local content in each item. Another innovation was the publication of the Local Content Primer as a measuring tool for the contractual local content.
For the Pre-Salt Round, held under the production sharing model in 2013, the minimum required local content was 37% for the exploration phase and 15% for the long-term test to be held at this stage; 55% for the modules of the development stage to start production by 2021 and 59% for the modules of this same stage to begin until 2022. There was no definition of maximum percentage.
CNPE Resolution No. 07, of April 11, 2017, defined a new Local Content model to be applied in the next bidding rounds. Besides being no longer a scoring factor in bids, there was a simplification of the commitments and a reduction of the minimum percentages. For blocks onshore, only global commitments will be required for the Exploration Phase and the Production Development Stage, in both cases of 50%. As for offshore areas, the commitment required is 18% (global) for the Exploration Phase, and for the Production Development Stage, minimum commitments were fixed for three macro groups: Well Construction (25%), Collection and Drainage System (40%) and Stationary Production Unit (25%).