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Government raises another $1.22 billion in oil auction

The consortium with Petrobras and Chinese CNODC was the only to bid

Published in 07/11/2019 - 18:14

By Vinícius Lisboa Rio de Janeiro

The sixth round of concessions for shared production of Brazil’s National Agency for Oil, Natural Gas, and Biofuels (ANP) ended with one block awarded of the five up for auction in the pre-salt oil polygon, yielding $1,22 billion in signing bonuses.

Petrobras had expressed preference for three blocks, but placed just one bid in a consortium with China’s CNODC, 80 percent of which controlled by the Brazilian state-run giant, 20 percent in the hands of CNODC. The awarded block was Aram, in the Santos basin, considered the most valuable. The bid offered was the minimum, with the percentage of surplus oil at 29.96 percent.

In the shared production regime, the percentage of oil offered is the criterion used to assess proposals, as contracts stipulate that part of the production must be split with the Brazilian government.

In addition to Aram, Petrobras had expressed preference for the blocks of Sudoeste de Sagitário, in the Santos basin, and Norte da Brava, in the Campos basin. When Petrobras exercises this prerogative, the winning consortium must include the Brazilian firm as operator and grant it the control of a minimum 30 percent.

Surprise

Petrobras’s absence in these blocks surprised ANP, whose director, Décio Oddone, admitted he expected the three areas to be awarded. “I’m very surprised indeed,” he said.

“What we’ll be seeing in the coming years if the drilling of hundreds of wells and the installation of dozens of platforms,” he said, adding that, nonetheless, he believes that Petrobras’s preference “intimidated the competition,” as it comes in as operator in the consortium when it shows preference. “Other companies could be interested in bidding as an operator,” he argued.

Petrobras

Carlos Alberto Pereira, director for Exploration and Production of Petrobras, said the company came out of this week’s auctions content and victorious, and explained that the firm was expecting to control no more than 30 percent in the two consortiums it failed to win.

Pereira went on to say Petrobras will keep its debt reduction target, despite the investment required with the new acquisitions, and added the resources will stem from the funds of the company and loans already granted.

Rounds

The bidding rounds are auctions where the government grants the right to explore and produce oil and natural gas in Brazil. The difference between the sixth round and the round held Wednesday (Nov. 6), dubbed transfer of rights, lies in the legislation created in 2010 for the development of pre-salt areas in the Santos basin. This legislation granted Petrobras the right to explore up to 5 billion barrels of oil equivalent. It was later on found, however, there was considerably more oil in the region. Therefore, whatever comes as surplus is auctioned off under transfer of rights, and Petrobras must be refunded according to how much it brought in as investment.

There are also auctions under the concession regime, in which the company owns the oil. These are outside of the pre-salt areas.

Translation: Fabrício Ferreira Edition: Fernando Fraga / Nira Foster

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