Brazil Hosts Major Auction for Oil Fields -- 3rd Update
07 Giugno 2018 - 9:31PM
Dow Jones News
By Luciana Magalhães and Paulo Trevisani
RIO DE JANEIRO -- The world's largest energy companies lined up
Thursday for a major auction of coveted Brazilian oil fields, even
as Brazil's government rolled back some market-friendly policies
that would have made its oil industry more competitive.
Bidders offered more than $800 million plus large shares of
so-called profit oil to Brazil's government for the right to
explore three blocks in the Campos and Santos basins, thought to
hold about 14 billion barrels of oil.
A consortium formed by Exxon Mobil Corp., Statoil Brasil -- a
unit of Norway's Equinor ASA -- and Portugal's Petrogal won the
largest block, known as Uirapuru, with a $679.4 million signing
bonus plus 75.4% of profit oil, an offer higher than the minimum
bid by 240%. Brazil's state-controlled Petróleo Brasileiro SA, or
Petrobras, exercised its right to be the operating partner, with a
30% share of the consortium.
It was the government's fourth auction for areas in the pre-salt
region of southeastern Brazil where as much as 100 billion barrels
of crude are believed to be locked under salt layers far beneath
the seabed.
The smallest block on sale, known as Itaimbezinho, failed to
attract bidders. Still, the final result was within market
expectations.
"Competition was very high," Brazil's top energy regulator,
Decio Oddone, said to reporters after the auction. "The Brazilian
society will appropriate 90% of pre-salt proceeds."
The pre-salt reserves were discovered in 2006, but private
companies were kept away and production delayed by rules that
required Petrobras to be the operating partner with at least a 30%
stake in any consortium in the region.
The government eased those rules last year to allow other
companies to work without Petrobras if the state giant declined to
participate in a project, although Petrobras still has the option
to be the operator in areas it chooses.
The auction comes just days after Brazilian truckers went on
strike to protest diesel prices that have soared along with
international oil prices. The strike brought commerce to a
standstill and forced the government to reinstate price controls
for diesel using tax cuts and other subsidies, which it estimated
will cost $2.5 billion this year.
The decision prompted the resignation of Petrobras's
market-friendly chief executive, Pedro Parente, who had relied on
the market pricing policy of the past two years to improve results
and lower debt at the state oil company.
Despite wavering over fuel prices, the government has a history
of respecting contracts in the oil industry, leading analysts to
believe companies securing blocks in the pre-salt would avoid any
potential backpedaling in the future.
Exxon Mobil, which is becoming one of the largest players in
pre-salt, noted that its latest winning bid brings to 25 the total
blocks it has in offshore Brazil.
"Uirapuru is a uniquely valuable block that represents
tremendous opportunity for us," the company said in a press
release. "We look forward to exploring and developing [Brazil's]
world-class resources."
Some analysts have been warning that high bids for pre-salt
blocks pose risks for oil companies.
"High interest for the pre-salt is leading to very risky bets,"
said Juliana Miguez of Wood Mackenzie, an energy consulting group.
She warned projects could become unprofitable if production doesn't
turn out as expected, "but based on pre-salt estimates, they are
feasible."
The long-term nature of the projects is also making bidders play
down near-term concerns, analysts say.
"The exploration cycle can last two governments," or eight
years, said Helder Queiroz Pinto Junior, an economics professor and
former oil regulator. "The companies focus on the geological
conditions, and these are promising areas."
Strong competition led Petrobras to increase offers on two oil
fields. The new CEO, Ivan Monteiro, said the company is prepared to
make higher bids.
"We continue with the premise of increasing the company's
exploratory portfolio," he said. "We came from two very difficult
years."
Petrobras's participation is a sign for some that the blocks
hold good prospects.
"No one knows the Brazilian coast better than Petrobras," said
Adriano Pires, director of Rio-based think tank Brazilian
Infrastructure Center. "Investors recognize that the company...has
been very careful in its investment decisions."
Write to Luciana Magalhães at Luciana.Magalhaes@wsj.com and
Paulo Trevisani at paulo.trevisani@wsj.com
(END) Dow Jones Newswires
June 07, 2018 15:16 ET (19:16 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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