Home Oil Crisis: Local Content is seen as the main obstacle to the economy

Oil Crisis: Local Content is seen as the main obstacle to the economy

14 April 2017 13 gies: 52
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Oil Crisis: Local Content is seen as the main obstacle to the economy

Hello friends and followers of Click Oil and Gas, I would like to provide some personal opinions regarding the crisis in the sector, not only in the offshore sector, but in all segments of the oil industry. Many people, mainly young people 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 brutally affected by corruption schemes involving the state-owned Petrobras.


Oil Crisis: Local Content is seen as…

Despite the difficulties, the world of the 21st century is literally fueled 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 IBP studies, could reach 200 billion barrels. Possibly the human race would live on another form of energy and we would not be able to produce everything we are capable of using our fossil fuel reserves. But then you ask me: if we have oil, we have companies with technology to explore and qualified workers, what is missing then? What is lacking my friend is political will!

In the article in which the Click Petróleo e Gás was present at the Avant Premiére event, which we were with world's largest oil producers, it was reported that the fault of the lack of investments and opportunities in the sector is solely and exclusively governmental because of Local Content. (Which is the keyword of today's subject)

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

Let's follow a hypothetical example (which actually is not): Petrobras needs to produce a certain asset and it needs to hire a BRAZILIAN company to do it. These same ones must consume and do business with other companies in the country. (a kind of territorial screening) Did you notice that because of local content our market was completely closed? The issue is that Brazilian companies do not have the capacity to exploit the full potential that we could if the market were opened to other foreign companies. Petrobras literally has its hands tied because there are global companies with this technological and operational expertise to produce everything under our feet, but it cannot hire them because of the local content. As a consequence, Brazil stops receiving investments, which would result in a lack of injection into the economy. We stopped generating jobs because there would be fewer operations and we lost the chance to lower fuel prices, since the greater the number of operators, the greater the amount of oil produced and, consequently, the cheaper and more competitive prices would become, since these same would compete with each other for greater resourcefulness in the domestic market. (which would be the law of supply and demand)

Another issue that affects the economy is the taxes imposed by the government, with Rio de Janeiro being the champion of them. Floods of taxes appear all the time, which hinder and discourage oil operators in Brazil.

Companies such as Shell, ExxonMobil, Total, Chevron and a range of multinationals have already said that they are waiting for the results of the elections in 2018 to find out whether the new president, together with his allied base, will make the issue of local content more flexible and whether they will open the market to foreigners or not. And I say one thing friends, if you vote for the PT government again, we will literally be finished!

The world looks down on Workers Party governance and they won't invest in a country run by a government that makes it difficult for other operators to enter. And you know very well how the mind of that party works: “Petrobrás is ours, the oil is ours but the money is theirs.” Messing with local content laws, no way.

This crisis we are going through is just the tip of the iceberg. I would like you to stop now to think about future generations, that you look well and deeply into the eyes of your children and ask yourself if what you, I and Brazil are going through at the moment due to this crisis, is it fair that they go through too.

Remember, in 2018 vote for presidential candidates who intend to open the market (to other companies) and change local content, the large world corporations have already made it clear that if there is no such initiative on the part of political leaders in this sense, no investments, it will simply be 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 things, I tell you that this “benefit will end”. The government spends more on these social programs than it manages to collect and as a result, we are being shot in the social security issue to cover the hole in the public coffers. In 2018 these cuts will naturally also reach the government's social programs. In other words: It's going to be bad for everyone.

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