WoodMac: New Regulations to Help Boost Brazil's Pre-Salt Oil Production

Brazil’s pre-salt oil production could increase at a faster pace by the mid-2020s due to the country’s new local content regulations.

A June 20 report by Wood Mackenzie, analyzing the impact of the regulations on production, royalty collection and job creation, found that the regulations could speed up the deployment of floating production, storage and offloading (FPSO) units, resulting in 21 billion barrels of additional reserves. This is compared to the production plateau of 3.7 million barrels per day under the old local content commitments.

“Brazil's new local content policy debottlenecks FPSO construction by allowing operators to construct hulls in Asian shipyards and use Brazilian suppliers to build and integrate selected modules,” Juliana Miguez, research manager with Wood Mackenzie's Latin America upstream oil and gas team, said in a release.  

Additionally, faster FPSO deployment would create more jobs and boost royalty collection. This could be to the tune of more than 95,000 jobs generated and royalties doubling from $28 billion to $56 billion in the next decade, Wood Mackenzie reports. 

“With up to five FPSOs targeted for award during 2018, the new rules will have an immediate impact on Brazil's offshore development, debottlenecking the sector and laying the groundwork for faster FPSO deployment,” Miguez said, adding that “most operators will likely convert their high local content commitments to the new levels to speed up development.”

In early June, a record 16 companies registered to bid for stakes in Brazil’s pre-salt oil play.