Technology and innovation in the Brazilian oil sector: ticket to the future or passage to the past?

This article demonstrates how the oil regulatory framework enacted in Brazil in 2010 will have detrimental effects on technology and innovation. The shortcomings essentially derive from three of its aspects: (i) operational exclusivity; (ii) the governance structure of the operational committee; and (iii) local content policies which lack adequate focus and strategic planning. All these elements actually stem from an excessively intrusive regulatory approach, within a typical top-down model, disproportionately reliant on command and control procedures. The current regulations will lead to significant drawbacks in technology and innovation in Brazil that will inevitably affect Petrobras. Even worse, however, they will not guarantee the development of a dynamic and sustainable industry of suppliers. Instead of using Petrobras to propel its industry of providers towards higher technological standards, suppliers will be dragging the national oil company downwards at the expense of the whole sector. A less intrusive regulatory framework, based on reflexive and responsive regulations is more suitable in this context, since it induces agents to continuously interact in a favourable way for the intended outcomes, instead of imposing norms and rules on them that most probably lead to other undesirable consequences.