Brazil’s offshore bidding round "a disaster"

Brasilia, November 8 - Neftegaz.RU. Brazil’s offshore oil & gas auction that had been described as the largest ever came short of expectations. The round has even been described as a disaster, as only Petrobras and 2 Chinese companies submitted their bids, with other oil majors passing up on the opportunity.

The national petroleum regulator ANP had offered up for bidding the Buzios, Sepia, Atapu, and Itapu oil fields with confirmed reserves in the Transfer of Rights offshore area in the Santos Basin, but only Buzios and Itapu received bids.

“Total disaster is the best way to describe this morning’s round,” Welligence Energy analyst Pablo Medina tweeted said.

Brazil’s Petrobras had earlier had already exercised its preemptive rights – according to Brazil’s laws – to act as the operator of the Buzios and Itapu areas with a minimum of 30% stake ownership in any winning consortium.

After the bidding round, Petrobras ended up as the operator with a 90% stake in the consortium with CNODC Brasil Petróleo e Gás (5% stake) and CNOOC Petroleum (5% stake), which acquired the exploration and production rights of the surplus volume of the Búzios field from the Transfer of Rights Agreement.

Also, Petrobras acquired 100% of the exploration and production rights of Itapu field surplus volume. Atapu and Sepia oil fields received no bids.

Brazil had hoped to get more than $26 billion from the upfront signing fees for the four areas on offer. However, it received $ 17,1 billion, most of it to be paid by Petrobras.

“For the ANP, not one Major participating is a glaring failure; meanwhile the government misses out on $9B in signature bonuses. A not so gentle reminder that we are in a buyer’s market. The round was doomed by high signature bonuses, the overly complex and non-transparent Petrobras reimbursements, and marginal economics. Memo to many countries today – there are many opportunities out there, even the Surplus TOR competes for capital”, Medina tweeted.

While the round has been widely seen as a disappointing one, the Brazil petroleum regulator’s Director-General Décio Oddone tried to find a silver lining and said the auction was successful.

He said: “It was a success because it was the biggest ever and raised the biggest bonus ever recorded in such an auction. And, mainly, because it was able to unlock a set of investments that will allow the collection and benefits of this wealth to come to Brazilian society.”