• Energy ministry is studying more flexible local content rules
  • President Dilma Rousseff still needs to authorize changes

Brazil is expected to loosen regulations in the oil industry on contracting goods and services after current restrictions dampened demand during a recent licensing round, an industry group said.

The changes, under study by the Energy Ministry and that still need to be signed by president Dilma Rousseff, would make Brazilian projects more competitive amid low oil prices, said Jorge Camargo, the head of the Brazilian Petroleum Institute, a lobby known as IBP. The Energy Ministry said in an e-mailed response it is studying new rules to incorporate Brazilian engineering, which would free producers to hire larger amounts of goods and services overseas.

“It is a good sign, a good initiative,” he said Tuesday during the Offshore Technology Conference in Rio de Janeiro. “We don’t have the details yet.”

If the presidential decree is signed, Brazil could ease limits on foreign-built oil equipment to reduce development bottlenecks. They would be the first changes to a Buy-Brazil model introduced a decade ago to spur investments in technology and manufacturing in Latin America’s biggest economy. The amount of minimum local content varies depending on each project in Brazil.

IBP Executive-Secretary Antonio Guimaraes said the revisions are expected to allow producers to include investments in the local supply chain that were previously excluded from local content calculations.

“These are initiatives already implemented by the industry that would be recognized as part of the local content for the first time,” Guimaraes said. “We need to wait and see what the decree will bring.”

Producers including state-controlled Petroleo Brasileiro SA have paid hundreds of millions of reais for failing to meet local content guidelines. Brazil’s most recent oil bidding round this month had the lowest turnout in more than a decade as low oil prices and the procurement policies reduced interest.

The plan was negotiated by Energy Minister Eduardo Braga, and the changes don’t need approval from Congress, Guimaraes said. Oil regulator head Magda Chambriard told reporters in Rio de Janeiro Tuesday that the agency is working with the government on local content adjustments and the energy ministry will release the details.

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