Brazil Holds Its Most Successful Oil Auction--Update
27 Settembre 2017 - 10:52PM
Dow Jones News
By Paul Kiernan
RIO DE JANEIRO -- Brazil held its most successful oil auction
ever Wednesday, as a new partnership between state-run Petróleo
Brasileiro SA and Exxon Mobil Corp. agreed to shell out more than
$1.1 billion for rights to drill in coveted offshore areas.
Petrobras and Exxon teamed up in six exploration blocks in the
Campos Basin off Brazil's southeastern coast, at least some of
which are believed to hold oil in an ultra-deep layer known as the
"pre-salt." Though the companies agreed to split the financial
burden of developing the blocks 50-50, Petrobras will operate all
six of them, meaning it will make the key decisions.
The auction marked a return by Exxon, the world's largest
publicly traded oil company, to Brazil after it abandoned efforts
to drill in the neighboring Santos Basin in 2012. The Wall Street
Journal reported in April that Exxon was discussing a possible
partnership with Petrobras in hopes of regaining a foothold in one
of the world's richest areas for offshore oil exploration.
Exxon Mobil's chief executive in Brazil, Carla Lacerda, declined
to comment.
For Brazil, the signing bonuses from Exxon and Petrobras, which
beat bids by majors including Shell, Repsol, Cnooc, Total and BP,
marked a boon to government efforts to attract private investment
as the country recovers from its deepest recession ever. Officials
had predicted signing bonuses would fall in the range of $157
million to $313 million.
Since taking office last year, conservative President Michel
Temer has sought to loosen regulations that had limited
private-sector interest in Brazil, even after the Western
Hemisphere's largest discoveries in three decades were made here in
2007.
In November, the government scrapped rules that Petrobras
operate and take a minimum 30% stake in all pre-salt fields. This
year, the government also reduced the minimum levels of equipment
and machinery that oil companies are required to source locally,
which drove up Brazil's production costs.
"What we need to do is exploit our potential at a moment when
the economy needs the oil-and-gas industry more than ever," Energy
Minister Fernando Coelho Filho said.
Speaking to reporters, Petrobras CEO Pedro Parente attributed
the company's willingness to fork over big bucks to "the whole
suite of measures that the government has adopted to increase the
regulatory framework [and] stimulate investment."
He also suggested Petrobras knew something about the blocks on
offer that its rivals didn't. "Petrobras is the company that
naturally has the greatest body of information about the Brazilian
offshore, so you should be able to imagine that we wouldn't pay the
amount we paid if we didn't have information that it was worth it,"
Mr. Parente said.
Petrobras and Exxon agreed to pay a total $1.08 billion in
signing bonuses for just two blocks, dubbed C-M-346 and C-M-411. In
the former, their bid was more than five times higher than the
runner-up consortium formed by Shell and Repsol. In the latter
block, Petrobras and Exxon offered nearly 25 times as much as
runners-up Total and BP.
Magda Chambriard, the former head of Brazil's national oil
agency, known as the ANP, said the blocks Petrobras and Exxon won
together are unique because studies have shown them to contain oil
in the pre-salt layer, where Brazil's largest reserves have been
found. But the blocks were auctioned under a less-onerous
concession regime than is usually the case for pre-salt oil.
"Those blocks are special because they're...well-identified as
pre-salt, with good-quality seismic, a lower government take and
without that whole pile of red tape," Ms. Chambriard said. "That's
why bids were so high."
Wednesday's auction was the first of nine that Brazil plans to
hold through 2019. The next two, scheduled for Oct. 27, will take
place under the pre-salt regime and are seen generating $2.42
billion in signing bonuses, said ANP Director Décio Oddone.
Mr. Parente said the decision for Petrobras to operate all the
blocks in which it partnered with Exxon was mutual and based on its
position as the undisputed leader in Brazil's deep-water
sector.
But Petrobras faces challenges that are equally unmatched in the
oil industry. It has the largest debt burden of any oil company, is
at the center of the biggest corruption scandal ever uncovered, and
is exposed to meddling by Brazilian politicians due to the
government's controlling stake in the company.
While Mr. Parente, whom Mr. Temer appointed last year, is widely
seen as a competent executive, analysts say Brazil's 2018
presidential election represents a major risk to Petrobras's
prospects for fixing its balance sheet.
Write to Paul Kiernan at paul.kiernan@wsj.com
(END) Dow Jones Newswires
September 27, 2017 16:37 ET (20:37 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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