ANP chief tells NewsBase he is optimistic ahead of Brazil’s 4th Pre-salt Bid Round

7 June 2018
05 June 2018, Week 22, Issue 716

Ahead of the auction on June 7, ANP director-general Decio Oddone said the registration of 16 companies to bid demonstrated the appeal of the country’s pre-salt acreage, writes Rodrigo Miguez in Rio de Janeiro and Ryan Stevenson in Edinburgh

WHAT: Four areas are available in the auction, with signature bonuses fixed at US$931 million.

WHY: Brazil has loosened the regulations that govern the pre-salt, which allows IOCs to operate blocks. 

WHAT NEXT: The next pre-salt bid round is scheduled for September, ahead of the presidential election in October. 

Brazil’s National Petroleum Agency (ANP) is gearing up for the country’s 4th Pre-salt Bid Round, which will take place in Rio de Janeiro on June 7. The auction will be streamed live on NewsBase.com on this page.

Four areas within the Campos and Santos Basins – Itaimbezinho, Tres Marias, Dois Irmaos and Uirapuru – will be offered in this round with combined fixed signature bonuses of 3.2 billion reais (US$931 million).

Ahead of its launch, the ANP’s director-general, Decio Oddone, spoke exclusively to NewsBase Intelligence (NBI) about the bid round and sounded an optimistic note about its prospects. 

“I believe it will be a huge success,” he said. “Petrobras has already declared interest in three of the four areas, and other companies have said they are interested in all four offered areas, so I’m optimistic.”

Part of the reason for Oddone’s optimism is the recent change in local content rules in Brazil, which he believes will reduce the risk profile for investors. “The new rules will help to unlock investment and will inject more competition into the oil and gas industry, attracting investors from around the world,” he said. 

A 5th Pre-salt Bid Round has been programmed for September, and Oddone is confident that it and future auctions will demonstrate that the appetite amongst the oil majors for assets offshore Brazil remains strong. 

“The ANP’s pre-salt bid rounds have generated 18 billion reais [US$4.7 billion] in signature bonuses, which is proof of their success so far,” he said. “We also expect great interest in the next rounds. The pre-salt areas can only be operated by the majors and their number is limited. The inscription of 16 companies in the fourth round surpassed any expectation, which demonstrates that Brazil is on the right path.”

In terms of attendance, Oddone noted that the return of US-based ExxonMobil as a bidder exemplified the strong appetite amongst the majors for Brazilian acreage, with higher oil prices driving an uptick in exploration investment. 

But the increase in oil and fuel prices has been matched by growing political tension in Brazil. This culminated in a mass truckers’ strike last week that ultimately led to the resignation of Petrobras’ CEO, Pedro Parente. It is also a presidential election year in Brazil, with the country due to go to the polls in October. So could political risk be a deterrent to investment in the upcoming bid rounds? Oddone does not think so. 

“Investments in the oil and gas sector are long-term and the contracts with the concessionaires last about 30 years. Brazil has a tradition of keeping the contracts signed; therefore the elections should not influence the interests of investors,” he said. 

Key details

Along with ExxonMobil, UK-based BP and Royal Dutch Shell are on the list of 16 companies that have registered to bid. The bid round will also see the debut of two companies without exploration and production contracts in Brazil – Germany’s DEA Deutsche Erdoel and Malaysia’s Petronas Carigali.

The other companies on the list are: Chevron (US), CNODC (China), CNOOC (China), Ecopetrol (Colombia), Petrogal (Portugal), Petrobras (Brazil), QGEP (Brazil), QPI (Qatar), Repsol (Spain), Equinor (Norway) and Total (France).

State-run Petrobras has exercised its priority rights to acquire a 30% participating interest as operator in three of the four areas. These are the Dois Irmaos, Tres Marias and Uirapuru areas.

As with previous pre-salt bid rounds, the signing bonuses are fixed, with rivals competing over the amount of profit oil that they offer the Brazilian state.

For the Tres Marias area in the Santos Basin, the winning bidder must pay a 100 million reais (US$26.3 million) signature bonus and commit to a minimum profit oil percentage of 8.32%.

Also in the Santos Basin, the terms for the Uirapuru area dictate a minimum profit oil allocation of 22.18% plus a signature bonus of 2.65 billion reais (US$696 million). 

In the Dois Irmaos area in the Campos Basin, the minimum profit oil percentage is 16.43%. The signature bonus is 400 million reais (US$105 million).

Itaimbezinho in the Campos Basin is the one area that Petrobras has not sought to be operator. The minimum profit oil allocation for this asset is 7.07% and the signature bonus 50 million reais (US$13 million).

The Saturno area in the Campos Basin was included in the preliminary tender protocol published by the ANP in January. But it has now been removed from the fourth bid round following a decision by the Energy Ministry.

The ministry decreed that Saturno should be unitised with the adjacent S-M-534 and S-M-645 blocks and offered in the 5th Pre-salt Bid Round that is due to be held before the end of this year.

The Titan, Pau Brasil and Tartaruga Verde areas will also be offered in the fifth round. 

 

Edited by

Ryan Stevenson

Managing Editor

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