This blog is designed to inform investors about business opportunities in Brazilian infrastructure projects. It covers energy, telecomm, mining, transportation, ports and airports greenfield and brownfield projects.
Its content is supported by official information and/or documentation gathered from news agencies, Brazilian regulatory agencies or other governmental entities.
This blog is updated upon new regulations on the areas covered by this blog are issued by Brazilian Agencies.
Oil & Gas: Brazil raises record $1.5bn in auction of oil exploration blocks
Government raises record R$2.8bn in auction of oil exploration blocks
By Chico Santos, Cláudia Schüffner, Rodrigo Polito and Marta Nogueira | Rio de Janeiro
The 11th round of auctions of areas for oil and gas exploration scheduled by the National Oil Agency (ANP) to end Wednesday was concluded on a single day, Tuesday, and caused intense government celebration. The amount raised, to be deposited by August 6th, is a record R$2.8 billion in upfront bonuses, more than R$700 million above the R$2.1 billion obtained in November 2007, in the 9th round. It was also a new bid record for a single block, with R$345.9 million offered for FZA-M-57, a block at the mouth of the Amazon River that went to a consortium formed by France’s Total, Brazil’s Petrobras and the UK’s BP.
As expected, there was intense dispute for blocks in ultra-deep waters of the equatorial bank, which include the states of Pará, Maranhão, Ceará and Rio Grande do Norte and attracted bids from giants including Chevron, Exxon, Shell (unsuccessful), BP, BHP Billiton and Petrobras. The total premium over the minimum bid for the exploration rights was 797.81%, and the expectation of investments only in exploration of the 142 blocks auctioned, of 289 offered, is R$7 billion.
“This is stunning, really great and grand,” celebrated Magda Chambriard, director of ANP. She demonstrated particular satisfaction with the appetite of companies for promising onshore areas of gas in the states of Maranhão, Piauí, Paraíba and Bahia. In her view, this appetite creates strong prospect of success for the 12th round of auctions, planned for October, whose focus will be natural gas production, including promising shale gas reserves, currently a big attraction on the international hydrocarbon market. For November it’s scheduled the first round of auctions for the pre-salt layer, already under the rule of production sharing and not as concession, which is used for auctions of other sedimentary basins excluding the pre-salt one.
“The Brazilian regime is really a concession. Pre-salt is an exception that generates fields with 5 billion, 8 billion, 10 billion barrels of recoverable volume and this is an exception from any country in the world,” Ms. Chambriard said when commenting a statement by Senator Francisco Dornelles (Progressive Party, Rio de Janeiro) that the success of Tuesday’s auction was due to the concession regime, which should prevail over production sharing. “The exception will be treated as exception,” she said, after stressing that the pre-salt accounts for only 2% of Brazilian sedimentary basins.
The presence of 18 companies from 11 countries among the 30 winners of the auctions was another aspect highlighted by the ANP director as evidence of the round’s success. Not even the absences of companies from China and Japan that were registered — GDF Suez didn’t place bids either — shook the executive’s confidence. She was unable to explain the reasons for their absence, especially the Chinese, bud didn’t admit the hypothesis that they had opted to prepare for the pre-salt auction.
Ms. Chambriard preferred to celebrate the return of Total to Brazilian auctions, the consolidation of BG as a deep-water operator — it won ten blocks, six of them alone and four in partnership with Petrobras and Petrogal — and the strong presence of the controversial OGX of businessman Eike Batista and the emergence of Petra, a national oil company, as an onshore operator, and of BP as offshore operator. Another aspect highlighted was that blocks were sold in all 23 sectors of the 11 sedimentary basins offered.
Ms. Chambriard said upfront bonuses will have to be paid by August 6th, when 13 years sinc the signing of contracts from the round zero will be completed, reason for which it was chosen as the contract signing date for Tuesday’s auction.
João Carlos De Luca, president of the Brazilian Oil Institute (IBP), said the strong presence of OGX in the 11th round was something he already expected. “Every company needs to open exploratory fronts, needs to have portfolio, generate new opportunities,” he said. Mr. Batista’s company won 13 exploration blocks, 3 of which alone.
Two blocks won by OGX were in consortium with Exxon, company which didn’t have exploration and production assets in Brazil. They bought the rights for POT-M-762, in the Potiguar Basin (next to Rio Grande do Norte state), and CE-M-603, in the Ceará Basin. The consortium, Mr. De Luca said, shows Exxon’s respect for OGX. As for the Asian no-show, Mr. De Luca recalled that they have a profile of seeking assets that offer shorter term returns.
Mr. De Luca didn’t considered Petrobras’s participation small. “Petrobras played its role, which was bigger than I expected,” he said. He added that the arrival of new players is important for the Brazilian market and brings more dynamism to the industry as a whole. Petrobras won in consortium or alone more than 30 blocks, but opted in most of the consortia to give up the role of operator.
After being notified by Brazilian authorities due to two leaks detected in the Frade Field of the Campos Basin, in November 2011 and March 2012, Chevron won one block in the Ceará Basin, CE-M-715, as operator in a consortium with Ecopetrol.
Mr. De Luca said the success of the 11th round may be attributed to exploration opportunities, with potential to find reserves, and a stable political situation.