Local Content Strategy & Implementation in Brazil
Agenda • Brazil Today and Policy Framework • Brazil PSC 1st Bidding • Brazilian Local Content • Success Story − Shipyards − Subsea − Technology Center – Rio de Janeiro
• Challenges
Brazil Today and Policy Framework Area: 8,502,728 km² Population: 202 million GDP: US$ 1.8 trillion World’s sixth largest economy Over US$ 352 billion in International Reserves • Oil, Natural Gas and Biofuels regulated under the same institutional environment (ANP) • Brazil can double its proven reserves in the near future
Government MME (Ministry of Mines and Energy)
CNPE
• • • • •
(National Council for Energy Policy)
ANP
Certification Companies
(National Agency of Petroleum, Natural Gas and Biofuels)
Concessionaires Suppliers
IBP => Operator’s forum to discuss industry issues ONIP => suppliers list and suppliers identification ABESPETRO => Supplier’s forum to discuss industry issues
Brazil PSC 1st Bidding – Pre-Salt area • Bid year: 2013 • Libra Oilfield – Santos Basin • Bonus paid: US$5 billion; • Exploration phase: LC = 37%. • Development phase:
– LC = 55% for the first oil produced until 2021 – LC = 59% thereafter.
JV
Share (%)
Petrobras
30+10
Shell Brasil
20
Total S.A.
20
CNPC International Ltd
10
CNOOC International Ltd
10
Profit oil split (%)
Petrobras as the only operator in Brazil PSC agreements - 30% minimum
41,65
Brazilian Local Content • Local Content (LC) is now one of the major challenges of the Brazilian O&G industry • The LC policy evolution has gone through many changes over the years • Percentages of LC work as award criteria (together with signature bonuses and minimum work programs) at the ANP licensing rounds • ANP has a robust process to validate LC evidence • The LC policy encourages main international suppliers to be established in Brazil, providing services and/or manufacturing equipments with Local Content – Ex.: Subsea, Shipyard, Services • Final LC percentages is affected significantly by 2nd and 3rd level suppliers
Brazilian Local Content Process - Main players
Provides information about the LC part of the purchase or services
Responsible for guaranteeing the achievement of the minimum LC (quarterly reported to ANP)
Operator
Supplier LC certification process started in Round 7
• Defines and monitors LC • Accredits certification companies
ANP Certification Company Evaluates and issues LC certificates
Brazil Local Content - Minimum Requirements Minimum required by ANP Category ANP DEVELOPMENT Certificate
ANP Category DEVELOPMENT LC evidence
ANP Category EXPLORATION LC evidence
Minimum required by ANP Certificate
I- Geology & Geophysics I.1 Acquisition I.2 Processing and Interpretation
5% 40%
I - Drilling & Completion
II - Production Collection System
I.1 Rig Charter
II.1 Umbilical
10%
I.2 Drilling + Completion
II.2 Manifolds
30%
I.2.1 Wellhead
II.3 Lines Production / Flexible 45% Injection
I.2.2 Casing
II.4 Production Lines / Injection Rigid 80%
I.2.3 Production Column
II.5 Flow Ducts
80%
I.2.4 Well Equipment
II.6 Pumping System
30%
I.2.5 Drill Bits
5% II.7 Control System Submarine II.8 Basic Engineering 55%
I.3 Others
I.3 Auxiliary Systems
II - Drilling & Completion
I.3.1 Electric System
Minimum required by ANP ANP Category 40%DEVELOPMENT
80%
III.11.4.1 Pressure Vessels
80%
III.11.4.2 Ovens
80%
III.11.4.3 Tanks
90%
100%
100% III.11.4.4 Process Towers III.11.4.5 Cooling Towers
III.11.4.6 Heat50% Exchangers
50% III.11.4.7 Pumps
II.1 Rig Charter
10%
I.3.2 Automation System
II.9 Detailing Engineering60% 95% III.11.4.8 Steam turb ines 60% II.10 Management, Construction and Assembly 60%
II.2 Drilling + Completion
30%
I.3.3 Telecommunications System
II.11 Other
40%
II.2.1 Wellhead
45%
I.3.4 Fiscal Measurement System
III - Production Unit
60%
II.2.2 Casing
80%
I.3.5 Field Instrumentation
III.1 Basic Engineering
40%
II.2.3 Production Column
80%
I.4 - Logistics Support
II.2.4 Well Equipment
30%
I.5 Arvore de Natal
15% III.2 Engineering Detailing 95% III.11.4.13 Filters 85% III.3 Management, Construction and Assembly 60%
I.6 Others
III.4 Hull
II.2.5 Drill Bits
5%
II.3 Auxiliary Systems
55%
II - Production Collection System
III.5 Jacket
II.3.1 Electric System
60%
II.1 Umbilical
III.6 Naval Systems
II.3.2 Automation System
60%
II.2 Manifolds
II.3.3 Telecommunications System II.3.4 Fiscal Measurement System II.3.5 Field Instrumentation
Minimum required by ANP 85%
85% 85% 80% 70% 90%
III.11.4.9 Screw Compressors
70%
III.11.4.10 Reciprocating Compressors
70%
III.11.4.11 Diesel Engines (up to 600 HP)
90%
50%up to 24 " III.11.4.12 valves III.11.4.14 Burners
80% Protection III.11.4.15 Cathodic
90% 85% 80% 90%
III.11.4.16 Electric System
60%
40%
80% III.7 Simple Anchoring Systems II.3 Lines Production / Flexible Injection III.8 Multiple Anchoring 80% Systems
30% III.11.4.18 Telecommunication System
40%
60%
II.4 Production Lines / Injection Rigid
100% Modules III.9 Installation and Integration
40%
II.5 Flow Ducts
95% III.11.4.20 Field Instrumentation
III.10 Pre-instalção and Hook-up 85% and Assembly 100% of Anchor Lines III.11.5 Construction
II.4 Others
II.7 Control System Submarine
40%
III.11 Process Plants, Moving 50% and Injection
50% III.11.4.17 Automation System
70% III.11.4.19 Fiscal Measurement System
Total Investments Development 50%
III - Logistics Support
15%
II.8 Basic Engineering
III.11.1 Basic Engineering50%
Total Exploration Expenditure
37%
II.9 Detailing Engineering
95% III.11.2 Detailed Engineering
95%
II.10 Management, Construction and Assembly 60% III.11.3 Service Management
90%
II.11 Other
75%
III.11.4 Materials
60% 60% 40% 95% 55%
Success Story • Shipyard: local EPC suppliers invested in capacity expansion. 20% per year increase vs. last decade • Subsea: major suppliers invested in manufacturing capacity in Brazil to meet increasing demand • Technology: new research and development centers funded by the Concessionaires
Shipyards • Local EPCs - investing in capacity expansion − 82k direct workforce; − 324 constructions on going (vessels, rigs and PU)*
• Last decade – increase ≈ 20% per year since 2004 • Local content Requirements
− Attract foreign companies to establish locally − Hull conversion/construction: internationally (Round 1-6) or domestically (Round 7-12)
• Main bottleneck: dry docks – only 3 in Brasil • Challenges − Overdependence on Petrobras − Low productivity − International competitiveness
Shipyards: Direct workforce progress* Total
* Source: 2014 - Sinaval
2005
2006 2007 2008 2009 2010 2011 2012
2013 2014
14k
20k
78k
29k
33k
41k
56k
59k
62k
82k
Shipyards – cont’d Brazilian shipyard • 1980s: industry was extinguished • 2005+: the booming offshore segment + LC requirements => multiple shipyards built • Fully booked until 2016/17 with the current backlog • About half of existing demand can be met locally.
Shipyards backlog (CGT) Techint 4%
1 module and topside integration FPSO P-76
6 drillships
EBR 4%
1 module and topside integration FPSO P-74
Inhaúma 2%
4 FPSO conversion hulls (P-74 – P-77)
Enseada 4% Mauá 5%
EAS 20%
8 Panamax 4 Product tankers
10 Suezmax, 8 Aframax
7 drillships 2 modules and topside integration FPSO P-67 and P-70
OSX 8%
2 modules and topside integration FPSO P-75 and P-77
Brasfels 15% 3 modules and topside integration FPSO Cidade de Itaguaí FPSO P-66 FPSO P-69
QGI 8%
6 semisub rigs
2 modules and topside integration FPSO Cidade de Maricá and Saquarema
Brasa 8% 3 drillships
Note: CGT = Compensated gross tonnage. Source: IHS Energy
Jurong 12%
ERG 10% 7 FPSO newbuild hulls (P-67 – P-73)
7 drillships 2 modules and topside integration FPSO P-68 FPSO P-71 © 2015 IHS
Subsea Brazil current capacity—Christmas tree
• Subsea equipment and services
GE 7%
− Global industry leaders invest in local manufacturing, bases and R&D
• Foreign companies plan to expand in Brazil, seeking to win a share of this growing market
Aker 21%
One Subsea 37%
• New plants are being built
• Umbilicals remain a constraint
FMC 35% Source: IHS Energy
© 2014 IHS
Technology Centers – Rio de Janeiro • Operators of large fields must invest in 1% of gross income in research and development • Main International companies are establishing new R&D centers in Brazil - Rio de Janeiro
− Total investment >US$ 270 million during 2010–2013 − Increase LC and technology transfer − New technologies: waiver mechanism
Source: Parque Tecnológico UFRJ
Challenges • Drilling rigs and services • International competitiveness • 2nd and 3rd level suppliers • Frequency of licensing rounds • Shipyard bottleneck
More than USD100 millions in fines have been issued so far More to come Move form penalty-based to incentive-based system
Flavia Craveiro BP Brazil Local Content Lead Brazilian Oil, Gas and Biofuel Institute (IBP) Local Content Committee Coordinator
[email protected]
