Crise do Petróleo: Conteúdo Local é visto como o principal entrave da economia

Oil Crisis: Local Content Seen as Main Obstacle to the Economy

Written by Paulo Nogueira

Published on 14/04/2017 at 13:52

Updated on 14/04/2017 at 13:59

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Hello friends and followers of Click Petróleo e Gás, I would like to provide some personal opinions regarding the crisis in the sector, not only in the offshore sector but in all areas of the oil industry. Many people, especially young individuals who have never worked, come to me asking what I think of the moment Brazil is experiencing and whether they should invest time and money in a sector that has been brutally affected by the corruption schemes involving the state-owned Petrobras.

Oil Crisis: Local Content is Seen as…

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Despite the difficulties, the world in the 21st century is literally powered by oil. Brazil particularly holds the 5th largest daily production of hydrocarbons in the world, reaching a mark that exceeds 50,000 barrels. Our reserves, according to studies by IBP, may reach 200 billion barrels. Possibly, humanity would live off another form of energy and we would not be able to produce everything we are capable of with our fossil fuel reserves. But then you ask me: if we have oil, we have companies with technology to explore it and skilled workers, what is missing then? What is missing, my friend, is political will!

In the article where Click Petróleo e Gás was present at the Avant Premiére event, where we were with the largest oil producers in the world, it was reported that the lack of investments and opportunities in the sector is solely and exclusively a governmental issue due to Local Content. (Which is the key word of today’s topic)

Local content is a law that states that products and services related to oil exploration in Brazil must be provided by national companies. But that is where things start to get complicated.

Let’s follow a hypothetical example (which is actually not): Petrobras needs to produce a certain asset and needs to hire some BRAZILIAN company to do it. These companies must consume and close deals with other companies in the country. (A kind of territorial filtering) Did you notice that because of local content, our market has become completely closed? The issue is that Brazilian companies do not have the capacity to explore all the potential we could if the market were open to other foreign companies. Petrobras literally finds itself with its hands tied because there are global companies with this technical and operational expertise to produce everything that is beneath our feet, but cannot hire them due to local content. As a consequence, Brazil fails to receive investments, which would result in less injection into the economy. We stop generating jobs because there would be fewer operations and lose the chance to lower fuel prices, since the more operators there are, the more oil would be produced and consequently, prices would become cheaper and more competitive, as these same operators would compete with each other for greater performance in the domestic market. (Which would be the law of supply and demand)

Another issue affecting the economy is the taxes imposed by the government, with Rio de Janeiro being the champion in this regard. At all times, there are floods of taxes that difficulty and demotivate oil operators in Brazil.

Companies like Shell, ExxonMobil, Total, Chevron, and many other multinationals have already stated that they are waiting for the results of the 2018 elections to see if the new president, along with their allied base, will relax local content regulations and open the market to foreign companies or not. And one thing I tell you, friends, if you vote for the PT government again, we will literally be finished!

The world views the governance of the Workers’ Party with disdain, and they will not invest in a country governed by a government that complicates the entry of other operators. And you all know well how this party’s mindset works: “Petrobras is ours, the oil is ours, but the money is theirs.” Changing local content laws, not a chance.

This crisis we are experiencing is just the tip of the iceberg. I would like you to stop now and think about future generations, to look deeply into the eyes of your children and ask yourselves if what you, I, and Brazil are going through at this moment due to this crisis is fair for them to also experience.

Remember, in 2018 vote for presidential candidates who aim to open the market (to other companies) and change local content; the large global corporations have already made it clear that if there is no initiative from political leadership in this regard, there will be no investments, simply long years of crisis instead of a few.

The people who vote for the PT because of Bolsa Família, Bolsa Moradia, and a bunch of other benefits, I tell you that this “benefit will end.” The government spends more on these social programs than it can collect and as a consequence, we are being hammered in terms of social security to cover the gaps in public funds. In 2018, these cuts will naturally also reach the government’s social programs. In other words: It will get worse for everyone.

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Oil Crisis: Local Content Seen as Main Obstacle to the Economy

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Oil Crisis: Local Content Seen as Main Obstacle to the Economy

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