Evaluation of Social and Economic Effects of Local Content Management in the Oil and Gas and Shipbuilding Industry in Brazil: An Application of Input/Output Analysis

This paper aims to evaluate the applicability of input/output analysis to local content management as a tool to assess the relationship between the Brazilian government’s local content policy and social and economic effects of investment projects in the oil and gas and shipbuilding industry. The methodology comprised literature review on central themes, field research, and a case study focusing on investment projects.

A logical framework was developed by combining monitoring and evaluation models identified from the literature review and the conceptual approach of input/output analysis. On the basis of this framework, a reference project concerning the development of an oil field in the Brazilian presalt region was defined. From typical information from other similar projects in Brazil, investments associated with drilling, assessment, and completion systems; production collection systems; and production units were considered.

The main result refers to the creation of a new logical framework that allows measuring the social and economic effects of local content management on investment projects in oil and gas and shipbuilding industry in Brazil. It can be used as a powerful tool either for crisis management arising from possible reduction of investments in local content, subsidizing actions to mitigate negative social effects that could damage the corporate image of these companies, or for formulation or revision of local content public policies that enhance the positive externalities of investment projects in this industry.

The results of the case study demonstrated how the investments of an oil company could generate positive socioeconomic externalities. The “Social and Economic Impacts Report” for the reference project showed the results of direct, indirect, income, and total effects for effects on the value of production, gross domestic product, and generation of job positions for each of the 55 economic activities in the Brazilian input/output matrix prepared by the Brazilian Institute of Geography and Statistics.

Finally, these externalities were correlated with the structure of local  content requirements established by Brazilian regulation to identify competitive advantages for oil and gas and shipbuilding companies in the country.

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