Shell, Petrobras grab 3 blocks each in Brazil pre-salt auctions
Brazil netted 6.15bn reais (US$1.88bn) in signature bonuses at two pre-salt oil and gas auctions on Friday as companies delivered a ringing endorsement of President Michel Temer's pro-market reform agenda.
Royal Dutch Shell and Brazilian state-run oil producer Petrobras secured stakes in three of the eight blocks on offer while BP and China's CNODC clinched two each as part of consortiums.
Other successful bidders were Statoil, Total, Repsol Sinopec, ExxonMobil, Galp and Qatar Petroleum International (QPI).
"The results far exceeded our expectations," Décio Oddone, the head of Brazil's oil and regulator ANP told a news a conference. "Strong competition for areas means a greater share of production for the government and more revenue collection."
ALSO READ - Brazil pre-salt oil rounds: Who won what?
The first of Friday's two tender rounds included four so-called unitized areas that extend beyond the boundaries of blocks already under development.
A consortium comprising operator Statoil (40%), ExxonMobil (40%) and Galp subsidiary Petrogal Brasil (20%) was awarded rights for the coveted Norte de Carcará area by agreeing to hand 67.12% of future oil production to the government. According to ANP the area holds estimated reserves of 2.2Bb of in-situ oil.
Petrobras (45%) secured operatorship for the Entorno de Sapinhoá license alongside Shell (30%) and Repsol Sinopec Brasil (25%). The group agreed to cede 80% of production.
The Sul de Gato do Mato acreage went to a consortium made up of operator Shell (80%) and Total (20%), which pledged 11.53% of future output.
No bids were submitted for the Sudoeste de Tartaruga Verde area.
Signature bonuses in the first auction totalled 3.3bn reais.
In the second auction, Petrobras claimed a 40% operating stake in the Peroba field - partnered by BP (40%) and CNODC (20%) - accepting a government share of production of 76.96%.
Shell (55%, operator), CNOOC (20%) and QPI (25%) clinched the Alto de Cabo Frio Oeste block, ceding 22.87% of output, while Petrobras (50%, operator) and BP offered 75.86% of production to secure the Alto de Cabo Frio Central area. There were no bids for the Pau Brasil block.
Total signature bonuses in the second auction were 2.85bn reais.
OPPOSITION
Friday's bidding was delayed by almost three hours after a judge in Amazonas state granted an injunction request by the Workers Party, which claimed the sale of oil rights would lead to a loss in income for the Brazilian state.
The decision was overturned by a federal court judge in Brasília after an appeal by the government.
Hundreds of protesters also gathered in downtown Rio de Janeiro on Friday to oppose the privatization of pre-salt oil production and a reduced role for Petrobras.
After the auction, the Sindipetro oil workers' union vowed further legal challenges in a bid to suspend Friday's results, which follow a raft of investor-friendly policy changes.
OVERHAUL
In the past year, the Temer administration has lifted restrictions on private operators in pre-salt areas, lowered local content percentages and approved a 20-year extension to the Repetro tax incentive program.
The auctions came two days after Brazil's lower house of Congress narrowly voted to shelve corruption charges against Temer, allowing him to remain in power until his term ends in December 2018.
Analysts said the decision increased the likelihood that Temer would push through further structural changes such as social security and tax reform.
In addition to the regulatory revamp, the government has embarked on a busy oil and gas licensing round schedule as it attempts to rejuvenate an industry racked by recession, corruption and a three-year downturn in oil prices.
Last month, Brazil staged its 14th bidding round for concession licenses, which netted the government US$1.1bn in signature bonuses.
National hydrocarbons regulator ANP has said that E&P bidding rounds slated for 2017-19 will lead to direct and indirect investments of more than US$200bn.
On Thursday, ANP said Brazil could experience the fastest oil production growth among non-OPEC countries in the next decade as it targets 5Mb/d by 2027, up from around 2.6Mb/d today.
Brazil's only other sale of pre-salt rights came in 2013, when a consortium comprising Petrobras, Shell, Total, CNPC and CNOOC was awarded a license for the Santos basin's Libra field, which holds estimated reserves of 8-12Bboe.
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