On 14 May, the ANP, Brazil’s national oil licensing agency released the results of its 11th bidding round for oil and gas rights, the first for five years.
289 blocks were offered, onshore and in shallow and deep waters offshore, of which 142 blocks were awarded, covering 100,300 km². The auction raised a record total R$2.82 billion (US$1.38 billion), surpassing the ANP’s predictions. The successful bidders have also pledged to invest approximately R$7 billion in minimum work commitments, with up to eight years to explore and 27 years for development and production activities.
With less than 5% of Brazil’s huge sedimentary basins licensed, there is still plenty of potential, even outside of the much vaunted pre-salt areas. The success of this latest round demonstrates the industry’s pent up demand for exploration opportunities in Brazil, which should be further satisfied with two further bid rounds planned for October and November this year, one focussing on shale gas prospects and another on pre-salt areas.”
As expected, the fiercest competition was for blocks in the deep water of the equatorial margin off Brazil’s north east coast, which are understood to contain geology analogous to highly prospective areas of West Africa.
Although a record 64 companies qualified to bid, including many newcomers, many deepwater blocks were awarded to international majors with an existing Brazilian presence. Petrobras was once again the most successful bidder, but this time they took more non-operated interests in consortia with various international operators such as Total and BG Group.
This may indicate a change of direction for the Brazilian giant, which has struggled to bring its huge portfolio of projects online as quickly as forecast and seen its cash flow position deteriorate due to low local fuel prices.
Total partnered with Petrobras and BP to bid aggressively for blocks in the deepwater portion of the Foz do Amazonas basin, securing five permits.
BG Group was the most successful bidder for offshore blocks in the Barreirinhas basin, winning six on its own and a 50% stake in four more with Petrobras and Galp.
Statoil was awarded all six deepwater blocks in the offshore Espirito Santo basin, four blocks as an operator and two blocks as non-operator, with stakes ranging from 35% to 50%.
The onshore and shallow waters also provided rich pickings for new entrants, including a number of Brazilian start-ups, as well as new British entrants GeoPark (which won seven blocks in mature onshore basins) and Chariot Oil & Gas (which won four blocks in shallow waters of the Barreirinhas basin).
The Brazilian conglomerate, OGX surprised the industry with a strong showing, picking up 13 blocks, including four onshore blocks in the Parnaiba basin near its current Gavião Real field while Petra Energia was awarded nine blocks in the same basin.
The presence of 18 non-Brazilian companies from 11 countries, among the 30 successful bidders, was highlighted by ANP Director General Magda Chambriard as an indication of the round’s success. However, despite speculation that the auction would mark the start of their large scale investment in the sector, Chinese and Japanese companies were notable by their absence.
Although Sinochem, CNOOC, Repsol Sinopec, Mitsubishi, Mitsui, Sumitomo and JX Nippon had all qualified for bidding, no awards were made to any of them and, apart from Mitsubishi and Repsol Sinopec, they did not even participate.
Many now suspect that this round was used to gain experience, knowledge and contacts in advance of the pre-salt round late this year, which is likely to be the real target; a hypothesis acknowledged by Magda Chambriard and the ANP.
Ted Rhodes is from the Rio office of international law firm CMS