RIO DE JANEIRO—Brazil’s long-awaited presalt auctions took place in Rio de Janeiro on Oct. 27, and the results brought happiness to the Brazilian government and supermajors such as Royal Dutch Shell, ExxonMobil, Statoil and BP.
Six out of eight blocks were acquired in the auctions, and companies like Brazilian state-owned oil company Petrobras paid up to 200% more than what has been previously required for signing bonuses for the blocks. The winning consortiums also offered government takes of profit oil much above the minimum required. There is a clear trend of growing interest and increasing number of E&P operators in Brazil.
Although majors and the Brazilian government hailed the presalt auctions outcome as a success, there is a feeling inside the industry that more regulatory changes are needed. The sentiment was felt even before the auctions took place.
The day before the auctions Congressional Speaker Rodrigo Maia announced he would push for a vote to change the current presalt contract status as soon as possible from production-sharing agreements to licensing contract agreements for future presalt auctions. Post-salt auctions also use licensing contract agreements.
A licensing contract is even more attractive for oil companies, according to Maia. “The current presalt production-sharing agreement is very backward,” Maia said in a statement published in his website.
For Brazil’s Energy Minister Fernando Coelho Filho, every initiative aiming to make the Brazilian oil industry more attractive is welcome. A day after the auctions Coelho Filho said he is open to discuss changes in the presalt regulatory framework, but he stressed that it will take a long time to debate this issue.
“We are going to start this debate now,” he said before speaking on regulatory changes that have been made already.
The changes included removing a mandate that Petrobras must be the sole operator in the presalt and amending local content requirements.
“But I believe that every policy can be improved,” Coelho Filho said during a summit held in Rio.
According to investment bank Credit Suisse Group, the auction rounds’ results already characterize a successful round, but success of the rounds go much further. Most of the oil and gas industry’s biggest players participated in the auction.
Shell was among the companies that bet on Brazil’s presalt giant fields. Along with Petrobras, the European major acquired three blocks and will be the operator in two. “Our participation was superb. I am extremely happy with those blocks. I believe they are very important for us,” Shell Brasil CEO André Araújo told journalists after the auctions.
Shell is already part of the consortium that is carrying out exploratory activities in the Libra Field, where Petrobras is the operator. With the fields acquired, Shell became Brazil’s second largest operator, following Petrobras.
Petrobras presented offers on three presalt blocks—Peroba, Sapinhoá and Alto Cabo Frio Central. The blocks are in areas where the company previously exercised its right of preference.
Petrobras made a safe move when the company chose to participate in the auction through consortiums, according to Credit Suisse. Capital discipline and lower risk exposure were some of the benefits of being part of a consortium, the investment bank said.
The participation of Chinese companies CNOOC, CNODC and Repsol Sinopec was also remarkable and showed the growing interest of China, which is now the world’s top crude oil importer, in Brazilian oil.
“Looking exclusively at [the] longer term, we believe the bids can bear significant fruits should promising areas like Peroba and Alto de Cabo Frio Central turn out to be as productive as other neighboring presalt plays,” Credit Suisse Group said in a statement. “The results of the 2nd and 3rd [presalt auctions] are greatly encouraging for the Brazilian E&P industry and inspire high expectations for the upcoming rounds scheduled to happen in 2018.”
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