Brazil Mulls Easing Local Content Rules In Older Oil Contracts

Brazil’s oil regulator may allow companies to apply more flexible local content rules to preexisting E&P contracts, the agency chief said on July 18, in a bid to revive projects put on hold due to costly requirements.

Decio Oddone, director of oil regulator ANP, said the agency would open a 30-day comment period on the proposal, followed by a hearing and publication of the rule in September. Contracts signed since 2005 but before more flexible rules went into effect this year would be eligible.

“We believe this new option will unlock investments, attracting capital and generating new hires, jobs and revenue,” Oddone said at a press conference in Rio de Janeiro.

Many crude projects have been put on ice in Brazil, including exploration of the Libra oil field in the subsalt region of the Santos Basin, thought to be Brazil’s largest oil reserve, due in part to steep costs stemming from tough local content rules.

Oddone said the ANP had received more than 230 requests for exemptions from the rules by companies with preexisting contracts, including one by state-controlled oil firm Petrobras, which has partnered with Total, Shell and others to develop Libra.

In February ANP sharply reduced local content requirements in future oil E&P contracts in a boon to oil companies but a major setback for local suppliers. If approved as proposed, the plan announced July 18 would extend the more flexible rules to older contracts.

Machine and equipment makers association ABIMAQ said it opposed the proposal, describing local content requirements as “low” and the decision as unilateral. The oil companies “have not only failed to comply with local content rules in the past ... they are now trying to get rid of those obligations,” ABIMAQ Vice President Cesar Prata said.

The new resolution would also hammer out the rules for waiver requests and transfers of surplus local content, which have been pending for more than a decade.

Mexico Sets Date For Next Deepwater Oil, Gas Tenders

Mexico’s oil regulator, the National Hydrocarbons Commission, set Jan. 31 as the date for the next round of auctions for deepwater oil and gas tenders in the Gulf of Mexico.

The so-called 2.4 auctions will offer 30 areas, of which 10 are in the Cordilleras Mexicanas deepwater basin, 10 others in the Salina Basin, nine in the Perdido Fold Belt off the U.S.-Mexico maritime border and one more in the Yucatan platform.

The Cordilleras Mexicanas deepwater basin is home to national oil company Pemex’s Lakach natural gas project and located east of the Gulf Coast port of Veracruz.

Cordilleras Mexicanas is viewed by the oil and gas industry as having extensive untapped potential.

The auction will be the first time the basin has been made available to international oil majors, which for decades have profitably developed other fields in U.S. waters nearby.

Mexico’s first deepwater oil auction in December 2016 included blocks from the Perdido Fold Belt straddling the U.S.-Mexico maritime border and the Salina Basin farther to the south.

A 2013 constitutional energy reform ended Pemex’s decades-long E&P monopoly, paving the way for seven oil auctions since then.

—Reuters