MAJOR CHANGE IN OIL & GAS REGULATION IN BRAZIL

Oil and Gas regulation change in Brazil has been approved. The Federal Council responsible for Regulation Issuance has implemented the long-awaited changes on the local content requirements. Practically half of the demand of service and goods that needed to have national origination will be eliminated, opening path for the purchase of foreign based supplies.

Onshore operations required from 70% to 77% of local content and offshore operations from 37% to 63%.

Now, the new rules stipulate a need of only 50% of Local content on Onshore operations and from 18% to 40% on the offshore operation. Brazil has one of the biggest offshore explorations of the world.

Due to the fact that the sector is highly specialized, many opportunities will be open to foreign companies to provide their products and services, and high demand is to be expected. A good number of good, prospective opportunities is expected, but companies must be prepared to run and be ahead of competition. In order for companies to sell goods and services for the major Oil Company of Brazil, one of the biggest of the world, Petrobras, there is the need of a dense registration process.

Petrobras has crafted a b2b system that serves as a huge database for Petrobras to manage and present its tender opportunities for foreigner and national companies interested in selling to Petrobras. The system comprises an extensive net of suppliers of goods and services involving Brazilian and international companies on the oil and gas sector.

The system work as follows: Company data and evaluation questionnaires are provided, as well as the necessary documents that proves the company’s capability; Petrobras perform the evaluation of the submitted information and documents; If the result is satisfactory, the interested company is approved to receive notifications of purchases in the Company´s area and to participate on Petrobras tenders and contracting opportunities.

The company willing to participate has to be very careful in planning its insertion in the system, due to the fact that since the list of requirements can be extensive according to the service or product of interest, some months can be spent in the process.  Also, Petrobras updates with frequency a list of which services and products that are allowed to be presented to foreign companies. Each bidding process will be carefully analyzed by Petrobras, who will select the bidders, prepare the RFQ and contract terms and conditions, bidding type, clarify market issues related to bidding processes and finally choose the winner for the bid.

Together with that, effective anti-corruption measures have been put to work, a new governance that was implemented after ex-Chief Minister (from Fernando Henrique Cardoso government) Pedro Parente was nominated the new chairman of the company, and corruption schemes have been dismantled by the federal police. Market and analysts are certainly gratified an austere name is commanding the oil giant and certain that it amplifies chance for good competiveness and market opening for suppliers.

In many occasions, Pedro Parente has defended that ideological constraints that impeded Petrobrás to purchase overseas made the company less competitive, bringing up as a result less development for the Country, instead of the opposite. The change of mindset was ultimate with the change of regulation decreasing substantially the requirements for national content.

Together with a market –friend federal government that has been implemented quick regulation reduction, that portrays that the country is now a good bet for business investment.

If your company needs assistance with preparation to enroll in Petrobrás buying system and/or to be kept updated with information from this potential market, please get in touch with us below.

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More articles on Oil & Gas in Brazil:

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