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Crude Oil November 06, 2019 12:15:22 AM

Bidding Field Narrows as Huge Brazil Oil Auction Approaches

Anil
Mathews
OilMonster Author
Executives have also said Petrobras will deploy a $9 billion payment from the government related to a dispute over the TOR area in order to participate in the auction.
Bidding Field Narrows as Huge Brazil Oil Auction Approaches

OILMONSTER.COM- As Brazil approaches the biggest oil auction in its history — and one of the world’s most expensive ever — the field of deep-pocketed bidders has narrowed to less than a dozen oil majors.

In Wednesday’s auction, known as the transfer-of-rights (TOR) bidding round, firms are expected to pay up to 106.5 billion reais ($26.5 billion) in signing bonuses for fields that Brazil says may hold up to 15 billion barrels of untapped crude.

In September, oil regulator ANP said 14 firms signed up to participate in the auction of four TOR blocks, which could cement Brazil’s reputation as one of the world’s hottest offshore plays.

Still, a number of companies have expressed caution about the hefty signing fees. Two firms once seen as viable contenders — BP Plc and France’s Total SA — have announced they are dropping out altogether.

That in turn is turning eyes toward the select firms that have remained bullish on the prospect.

Perhaps the odds-on favorite to scoop up assets is Brazil’s own state-run oil firm Petrobras, according to conversations with several lawyers, advisors and executives in recent weeks.

While the company is aggressively selling assets to reduce debt, Petrobras CEO Roberto Castello Branco has made Brazil’s pre-salt region, where the TOR area is located, the centerpiece of its long-term corporate strategy.

Petroleo Brasileiro SA, as the firm is formally known, has already exercised preferential rights to become the operator in two of the four areas up for grabs, which together have a signing bonuses of about 70 billion reais. The firm will have at least 30% stakes there.

Executives have also said Petrobras will deploy a $9 billion payment from the government related to a dispute over the TOR area in order to participate in the auction.

Others are betting on China National Offshore Oil Corp (CNOOC) and China National Oil and Gas Exploration and Development Corp (CNODC), a unit of China National Petroleum Corp. Both are deep-pocketed, hold 10% in the nearby Libra block and are seen preferring non-operating stakes, which could make them a natural Petrobras partner, analysts say.

Neither firm responded to requests for comment.

In late October, Royal Dutch Shell Plc Chief Financial Officer Jessica Uhl struck a relatively upbeat tone on the TOR round, telling analysts it may be “a potential area” where the firm could “invest in the long-term health” of the company, while growing cash flow.

Courtesy: www.reuters.com

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