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Competitiveness of national oil and gas industries depends on protectionist measures or not?

Written by Renato Oliveira
Published 31/05/2020 às 08:05
Updated 01/06/2020 às 07:43
oil and gas shipbuilding

Controversial issues such as local content and tax easing for imports affect the equal conditions for our companies to compete with foreign giants? Or should we follow the path of the free market?

This controversial topic always comes up in conversations with friends and among professionals in the oil and gas and shipbuilding. O local content should it really be increased in order to protect our industry in order to create jobs in the internal market? Should tariff regimes for imported products really be made more flexible in order to encourage cabotage activities?

As you can see, the questions are many and go through discussions that would branch out throughout our economy, impacting the lives of Brazilians and the long-awaited quest for job creation.

Many defend free trade, with the competitiveness of each one speaking stronger and with that the lowering of prices with the introduction of competition in the market. Others, on the other hand, defend the participation of the state in order to transform incentives into job creation and consequently an increase in tax collection and the conversion of these into improved health and education services.

national content

Some defend it staunchly and think it is impossible for the platforms that extract our oil to be built and create jobs abroad while here we have millions of unemployed people and closed shipyards. Others accuse him of being the cause of the chaos that national shipbuilding is experiencing today, as the abundance of financing contracts, culminating in their lack of inspection, led us to the greatest wave of corruption that our country has gone through.

According to ANP data, the CL that started in the 7th round of bidding, went through certification peaks of 79% in 2015 and had as its icon the construction (2014-2018) of the P76 platform, budgeted at US$ 889 million, which at its peak, it employed 5 people in Pontal do Paraná, a city of around 26 inhabitants.

Currently, since the Temmer government, the CL applied has been 25% for goods and 5% for services in the construction phase of UEP's (Stationary Production Units).

Import tax easing

Governments have created measures aimed at increasing activities and consequently creating jobs in the maritime sector and throughout the oil and gas sector. Some of these measures, such as repeat, an apartment by the bay, for its easy access, free parking, and larger space for our group of XNUMX people. The house was great for a large group like ours, the host was very attentive, and the location was excellent; it was quiet and quick to walk to the old town. customs fiscal regime which suspends the collection of federal taxes on the importation of equipment for the oil and gas sector, mainly exploration platforms.

Created with the intention of making investments in the oil and gas sector viable, the regime is criticized by representatives of machinery and equipment companies who suggest that only those items that have no equivalent in Brazil should be exempted, thus protecting the national industry.

Another measure taken by the federal government was the creation of the project “BR do Mar” which changes the regulatory framework of the navigation sector (Law 9432/1997) and received this name for providing an alternative to highways. The measure changes the import rate for vessels that will operate in cabotage (transport between the country's ports), going from the previous 14% to zero, a considerable reduction in the tax burden for shipowners who want to increase their fleet. It is worth remembering that cabotage grew 10% in 2019 and has room to grow by up to 30% according to experts, as it is a safer and less polluting transport than the leader of our modal matrix, the road.

The measure was highly criticized by employees and shipbuilding industries as it favors the hiring and construction of ships abroad at a time when the main shipyards in the country are idle without orders, despite the government claiming the increase in maintenance services in the sector in due to the increase in the fleet.

Another alleged negative point is that the measure itself is important, but it does not solve the issue because the greater cost of shipowners is the operating cost, a factor that would only be reduced if the high tax burden on the bunker (ship fuel), labor costs and taxes were reviewed.

Finally, we have a long way to go with adjustments to current policies to create an environment that aims to favor foreign investment and to make our oil and gas industries competitive.

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Renato Oliveira

Production Engineer with a postgraduate degree in Manufacturing and assembly of pipelines with 30 years of experience in inspection/manufacturing/assembly of pipelines/tests/Planning and PCP and commissioning in shipbuilding/offshore (conversion of FPSO's hulls and topsides modules) in the largest national shipyards and 2 years in a Japanese shipyard (Kawasaki) inspecting and accompanying fabrication and assembly techniques of structures/pipes/outfittings (advanced finishing) for hull from Drillships.

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