Suppliers Differ on Local Content Rules in Brazil

Brazilian government requirements that 60% of oil industry vessels and platforms use local content received mixed reviews from private sector suppliers at the Friday launch of the Norskan Leblon support vessel in Rio de Janeiro state.

US-based FMC Energy System is involved in 48% of Petrobras's deep-water operations, and is even considering moving the production of its control systems to Brazil because of the local content rules, FMC marketing manager Leo Helland told BNamericas. "About 98% of our content comes from our Brazilian factory, and that helps us win contracts with Petrobras," Helland said.

Britain's Rolls Royce has also built up a presence in Brazil and does not foresee a problem with local content rules, a company executive said, but companies that do not have local representation consider that the government's content rules may ultimately backfire. "There is a lot of pressure to produce here in Brazil. If the government takes it to the extreme, they will end up hurting themselves," said Bjorn Skroder, general manager of the South American division of Norwegian ship parts and service company Unitor. Skroder added that the issue of local content requirements is easier to meet for ship construction than platform construction.

The construction of the Norskan Leblon, a PSV UT-755L support vessel, at the Asken Promar shipyard in Niteroi, Rio de Janeiro, "shows that Rio de Janeiro has the technological capacity to build ships for the country's oil industry," Rio state governor Rosinha Garotinha said at the launch ceremony. Government authorities have been pushing for the local construction of ships and platforms for the oil industry.

Darc Costa, the vice-president of national development bank BNDES, was quoted as saying by business daily Valor Economico that the bank wants to promote the revamping of the country's fleet and construct more oil platforms. "We can be partners in a grandiose project, which is to transform the South Atlantic into a large producer of oil," Costa said. BNDES' portfolio of offshore projects totals US$469mn, of which ten have been contracted worth US$296mn and US$173mn are four projects under study. Petrobras is expected to spend US$5bn a year up to 2007 on platforms and support vessels, while other oil companies are expected to invest US$2.8bn.

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