RIO DE JANEIRO – Brazilian state oil company Petrobras and Chinese partner CNODC were awarded on Thursday a prime pre-salt block in the second oil auction in as many days in the South American country.
Neither of the auctions met expectations, with the other four blocks on offer on Thursday not receiving a single bid.
The government earned $1.26 billion from the sale of the block, compared to expectations that proceeds on Thursday would amount to $1.96 billion.
As was the case in Wednesday’s “mega-auction,” there was no interest from large oil multinationals that had been approved to participate.
The consortium, in which the Brazilian company has an 80 percent stake and the Chinese firm has 20 percent, pledged to pay 5.05 billion reais ($1.26 billion) for licensing fees alone and offered the Brazilian government 29.96 percent of “profit oil,” or profits left over after money is spent by the consortium to recover capital and operational expenses.
That level of profit oil was the minimum required by Brazil’s ANP petroleum, natural gas and biofuels regulator.
The lack of interest among the participants in Thursday’s auction took the Brazilian government by surprise.
“The lack of interested parties is bad, although it doesn’t change the forecasts we’d made on investments, production increases and tax collection,” ANP director Decio Oddone said in a post-auction press conference.
“We have to rethink the current model that gives preference to Petrobras and inhibits competition,” he added.
Although Petrobras had said it would exercise its preemptive rights for three of the blocks on offer on Thursday, it only submitted a bid for the largest one – Aram, a 4,475-square-kilometer (1,728-square-mile) block located in the Santos basin, some 300 km southeast of Santos, Brazil.
Having exercised its preemptive rights (in which the state company tells the government before each pre-salt auction if it intends to impose its minimum 30 percent interest as a partner of the winning consortium), Petrobras also was expected to bid for the Sudoeste de Sagitario and Norte de Brava blocks in the Santos and Campos basins, respectively.
But no Brazilian or international company ended up submitting a bid for those areas, nor for the Bumerangue or Cruzeiro do Sul blocks.
The areas auctioned on Thursday are located in the coveted, deep-water pre-salt region, an offshore area that is so-named because its massive reserves are located under a thick layer of salt and which is said to have the potential to transform Brazil into the world’s fifth-largest hydrocarbons exporter.
With the exception of CNODC, no other multinational submitted bids in Thursday’s auction even though the signing bonuses were significantly lower than on Wednesday.
A record 17 companies from 11 countries had been approved to participate in the auction, although just one of the Chinese companies submitted a bid.
The list of participants was headed by American multinationals Chevron, ExxonMobil and Murphy Exploration, the United Kingdom’s BP Energy and Shell and China’s CNOOC and CNODC.
Also approved to participate were Spain’s Cepsa, Brazil’s Enauta, Portugal’s Petrogal, Norway’s Equinor, Germany’s Wintershall DEA, Qatar’s QPI and Malaysia’s Petronas.