Brazil held a second underwhelming oil auction in as many days on Nov. 7, as major global oil firms passed again on offshore blocks billed as among the world’s most promising.
The only block awarded in the Nov. 7 auction went to state-run Petrobras, and China National Oil and Gas Exploration and Development Corp. (CNODC), a unit of China National Petroleum Corp., which offered the minimum bid. Four other blocks received no bids.
The flop, following a similar lack of foreign interest in an even bigger round on Nov. 6, was a wake-up call to officials who expected this week to crown Brazil as uncontested champion of the Latin American oil industry.
Brazil’s new right-wing government has pledged market-friendly reforms and worked to scale back the role of Petrobras in the energy industry so that better capitalized firms can tap its vast reserves. The meager auctions this week suggest they may have made a major miscalculation.
Even Petrobras failed to submit bids for two blocks where it had exercised its preferential right to operate any fields. Its only bid on Nov. 7 was a minimum offer for the Aram Block, with a signing bonus of 5 billion reais (US$1.2 billion), along with CNODC, which took a 20% stake.
Brazil also failed on Nov. 6 to award two of four blocks in the nation’s most ambitious oil round ever, as steep signing fees and the dominance of Petrobras in the Transfer-of-rights (TOR) area scared off oil majors.
The bidding round Nov. 7 also offered access to the promising presalt area, where billions of barrels of oil are trapped beneath a layer of salt under the ocean floor. But the second auction was not subject to the same complex terms as the TOR auction, undermining the excuses that officials gave on Nov. 6.
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