RIO DE JANEIRO: Brazil ‘s much anticipated auction of deep water, pre-salt oil blocks raked in 6.15 billion reais ($1.9 billion) in Rio de Janeiro after the government overturned a court injunction suspending the sale.
The signing bonuses fell beneath the government’s goal of 7.15 billion reais, with two of the eight blocks not selling. However, the state secured hefty production sharing deals from consortiums including Shell, Exxon and Statoil, which will bring in far greater revenues down the road. Auction winners agreed to the highest cut of profit oil for the government.
In one block – won by a consortium of Brazil ‘s Petrobras, Repsol and Shell, the agreed share for the government of profit oil was 80 percent — far greater than the minimum 20 percent requirement. The auction marked a surge in participation of foreign giants in some of the world’s largest untapped oil reserves hidden deep under the ocean and then even deeper under thick layers of salt.
The last pre-salt auction was held four years ago, when foreign capital had a far harder time getting in on Brazil ‘s oil action. This time, the center-right government of President Michel Temer changed the rules to encourage investment. Chief among these measures was an end to the requirement for national champion Petrobas, which is emerging from a prolonged graft crisis, to operate and hold a minimum 30 percent stake in all pre-salt fields . This freed up Petrobas, which retained a preemptive right to select blocks, while opening the door wider to foreign partners. Sixteen companies were accredited for the auction .
The big sale was more than two hours late in starting as the government battled a last-ditch injunction. Judge Ricardo Augusto de Sales had suspended the sales at the request of the country’s main trade union grouping and the leftist Workers’ Party, which has attacked the auction as a sell-off of the nation’s wealth. But the government successfully appealed.
Pedro Parente, CEO of Brazil ‘s national oil company Petrobras, dismissed the drama, saying that in previous auctions the government had always managed to overcome court injunctions. “I don’t see this as any different,” he said. The pre-salt fields hold the promise of billions of barrels of oil , despite the technical challenges of operating in the deep Atlantic and the depressed state of global oil markets.