Foreign players key to avoiding Petrobras delays, says consultant

A ban on local engineering firms accused of corruption could open the door to greater foreign investment in Brazil's oil and gas sector, an analyst told BNamericas.

State-run oil company Petrobras has barred 27 companies cited in the so-called Car Wash investigation from bidding for new contracts.

According to Eric Eyberg, a senior consultant for Wood Mackenzie, easing of restrictions on international firms could help Petrobras avoid project delays.

"There is clearly some spend that can open up opportunities for international players," Eyberg said. "Obviously the local content rules would have to change a bit for that to happen and become more attractive.

"We do see there's going to be challenges if some of the key providers along the supply chain to Brazil oil and gas aren't able to participate for an undetermined period of time."

The Brazilian government demands between 37% and 80% of locally sourced goods and services for exploration agreements and between 55% and 85% for development contracts.

Requirements are lower for deepwater blocks and higher for onshore blocks.

The government has long resisted calls from Petrobras and international firms for the rules to be relaxed.

COLOMBIA EXAMPLE

According to Eyberg, local content is one of several areas the government needs to reconsider.

"Many other regional governments here in Latin America are going through the same process today and they're making changes," Eyberg said.

He cited the Colombian government's creation of higher oil price clauses and offshore free trade zones as examples of ways to attract foreign investment.

"Brazil will need to do the same thing," Eyberg said. "Brazil has a huge resource base. But in today's environment, producers are more concerned about value on a dollar per barrel of oil basis than resource size.

"It was a resource play for many years so Brazil didn't have to worry. Today it's a different environment. As long as oil prices are depressed, we're going to see that focus on value rather than resource size."

The full interview with Eyberg can be seen here.