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Abstract This paper addresses some issues that E&P companies in Brazil have been struggling in relation to Local Content Rules, whether to understand the regulation enforced by clause twenty of the concession agreement and regulatory provisions or to meet the targets set in the tenders' bids. Several public data was gathered to support a better analysis of some regulatory challenges of Local Content Rules. Introduction to Local Content in Brazil The oil companies interested in E&P activities in Brazil must previously win a bidding round for the chosen block, which activities will be regulated by a concession agreement and several regulatory provisions issued by the federal agency responsible to the industry, ANP, which name stands for Agency of National Petroleum, Natural Gas and Biofuels. Another possibility is entering into a farm-in agreement with an oil company that already has a concession agreement. In this context, Local Content presents a twofold nature:Local Content target weighting 20% in the tender bids; a contractual obligation based on the tender bids, once the oil company wins the block bidding. Nowadays, the legal provision of Local Content is Law #9478/97 article 2, item X, included by Law#12351 issued on 2010. The sole logical deduction arising from the aforementioned rule is that Local Content can be used as a national policy instrument, although there is no definition of how it should be calculated and what it is the exactly definition thereof. Even prior to 2010, Local Content was enforced by regulatory provisions issued by ANP and the clause twenty of the concession agreement. Several authors from many countries defines Local Content as a political orientation designed to improve the participation of local/domestic companies in providing services and goods for a specific economic sector, generating revenue, jobs and technological development. A secondary goal of Local/Domestic Content policies is to increase the likelihood of local companies to export to other countries, as it will be increased in scale production and technological competitiveness along the years of this policy protection. Accordingly, Local Content can be defined in its political aspect as a policy to enhance local goods and services industry capacities, helping forward the country's development and increasing employment offers. In light of this, Local Content aims to increase the participation of local inputs in the product's added value either by employing goods manufactured locally or services provided by local workforce.
Shell's E&P journey in Brazil started back in the seventies when 23 risk services contracts were executed for the exploration in nine onshore and offshore basins. Between the mid-seventies and late nineties, more than 30 wells were drilled on 13 blocks. Almost US$ 400 milion spent on seismic and drilling. This paper presents an overview of field development from the early days to the present. Between the late seventies and early eighties the discovery of Merluza gas field, in the Santos basin, and other non-commercial discoveries were made. The Merluza development started in the late eighties and was handed over to Petrobras for operation in 1993. The scope considered an offshore platform, subsea infrastructure, wells, gas pipeline to shore and an onshore gas unit. The Bijupirá & Salema fields, located in the Campos basin, 250 km east of Rio de Janeiro, in water depths between 480 and 880 m, were discovered by Petrobras in 1990 and included in bid round zero. Shell joined the Venture as the operator through the acquisition of Enterprise Oil in 2002 and production started in 2003. It was the first IOC operated development in Brazil with eight producers and six water injection wells. A re-development project resulted in four additional wells with first oil in 2013. The BC-10 Parque das Conchas deepwater development, also from bid round zero and in Campos basin, is a combination of several distinct small to mid-size fields that allow for phasing. The fields are off the coast of Brazil in about 1800m water depth. This series of successfully phased projects started with the deployment of the Espirito Santo FPSO, 11 wells and subsea boosting equipment in Phase 1 which came on-stream in July 2009. Phase 2 followed on-stream in October 2013 with an additional 11 wells (including 4 water injectors), subsea boosting equipment, and brownfield topsides upgrades on the FPSO. The Phase 3 investment has already added another 7 wells (including 2 water injectors) and will come on-stream in early 2016, after the subsea and topsides scopes are completed.
This paper intends to study presalt region economic viability by choosing the case of Libra field, the only presalt field to be acquired in Production Sharing Contracts bid round until now. Libra is considered one of the most important exploratory areas worldwide and its Brazil´s biggest oil field. For the conclusions of this paper it was necessary to estimate production volumes and costs involved in the development of Libra oil field according to industry parameters and government data. A forecast for oil prices was stipulated according to historical data and future contracts. A cashflow could be determinate by concatenating expected income with production sharing agreement government outcomes, making it possible to define the Payback, Internal Return Rate (IRR), and Net Present Value (NPV) of the investment. Varying the discount rate it was possible to study the NPV sensibility. The Brazilian new exploratory frontier region denominated Presalt is gaining remarkable importance in country´s economic and political scenario. The outlook for the next 10 years is that presalt fields will represent over 50% of Brazilian´s production, calling attention of researchers and experts. To aim high economic benefits, in such alluring area, local Government presented a series of adjustments in its regulations for E&P industry. However, drilling and producing in Presalt presents technology challenges, due to significant distances from shore, extreme water depths, thick and unstable salt layers, and still limited knowledge over reservoir rock. Research and appraisal will consume high investments, since technologies to be used in the region involve high costs. Added to this there are uncertainties concerning the current regulatory changes, which constrain production profits, and rise concerns over projects viability in the region.
Petrobras started production of oil and natural gas from the shared deposit of Atapu, through platform P-70, in the eastern portion of the Santos Basin pre-salt, near the Búzios field offshore Brazil. The platform is the fifth floating, production, storage, and offloading (FPSO) of the series of replicants; it can process up to 150,000 B/D and treat up to 6 million m3 of natural gas. The unit will operate in a depth of 2300 m, with an interconnection of up to eight producing and eight injection wells. Petrobras holds 89.257% of the rights to the deposit in partnership with Shell Brasil Petróleo (4.258%), Total E&P do Brasil Ltda (3.832%), Petrogal Brasil (1.703%) and PPSA, representing the Union (0.950%).
Petrobras simultaneously mothballed an offshore production platform and started a series of binding phases for its onshore and offshore assets as part of its divestment strategy to reduce debt. The Brazilian major approved the hibernation of the Merluza platform (PMLZ-1) located in shallow waters in the Santos Basin. The platform halted production in March due to weak natural gas demand. The hibernation will reduce operating expenses but will not affect the natural gas supply to the Baixada Santista market or the Merluza Polo divestment which began in March. The Merluza Polo comprises the Merluza and Lagosta concessions, in which Petrobras has a 100% stake.