Evaluation of Social and Economic Impacts of Local Content Management in Oil & Gas and Shipbuilding Industry in Brazil: An Ppplication of Input-Output Analysis

Abstract

Abstract This paper aims at evaluating the applicability of input-output analysis to local content management practices as a tool to assess the relationship between the Brazilian Government's Local Content Policy and social and economic impacts of implementation of investment projects in the Oil & Gas and Shipbuilding Industry in Brazil. The methodology comprised literature review on central themes, a field research and a case study focusing on investment projects. A logical framework was developed, by combining monitoring and evaluation (ME) models identified from the literature review and the conceptual approach of input-output analysis. Based on this framework, a Reference Project concerning the development of an oil field in Brazilian Pre-salt region was defined. From typical information from other similar projects in Brazil, investments associated with "Drilling, Assessment, and Completion System", "Production Collection System" and "Production Unit" was considered. The main result refers to the creation of a new logical framework which allows measuring the social and economic impacts of Local Content management on investment projects in Oil & 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 impacts that could damage the corporate image of these companies, and 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 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 impacts on the Value of Production, GDP and on the 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 (IBGE). Finally, these externalities were correlated with the structure of Local Content requirements established by the Brazilian regulation, to identify competitive advantages for the oil & gas and shipbuilding companies in the country.