Business

Brazil celebrates oil fields auction

Wednesday, November 01, 2017

Print this page Email A Friend!


RIO DE JANEIRO, Brazil (AFP) — Brazil's Government cheered a nearly US$2-billion payday from the auction Friday of its deep-water oil fields in a sale that brought the world's energy giants into previously restricted territory.

The auction — delayed by a late court injunction backed by the leftist former governing party — saw six of eight so-called pre-salt blocks in Brazil's offshore Atlantic region find buyers.

The Government racked up 6.15 billion reais (US$1.9 billion) in signing bonuses and the promise of far more.

“Brazil is back on the world oil scene,” said Decio Oddone, head of the National Petroleum Agency, which oversaw the auction.

Winners were determined according to the percentage of profit oil pledged to the Government in production-sharing agreements.

Signing bonuses fell beneath the potential 7.15 billion reais if all blocks had been sold. However, the Government still came out in front, because consortiums including Shell, Exxon and Statoil pledged bigger-than-expected production percentages.

In one block, won by a consortium of Brazil's Petrobras, Repsol and Shell, the agreed government share of profit oil was 80 per cent — far greater than the minimum 20 per cent requirement.

“I was really surprised by the (percentages)... I was very satisfied. It's good to see the market's appetite,” Oddone said.

LETTING IN FOREIGN INVESTORS

“Brazil has returned to the oil and gas exploration stage in style.”

President Michel Temer called the auction “an excellent result” and forecast that the winning consortiums would ultimately generate “around US$130 billion in royalties and other sources of receipts”.

The pre-salt fields, which are so called because the oil lies in ultra-deep waters and then below thick beds of salt, hold the promise of billions of barrels of oil. But they come with the challenge of operating in the deep Atlantic as well as that of the depressed state of global oil markets.

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, Temer changed the rules to encourage investment. Temer's scandal-plagued, centre-right Government has made bringing in foreign investors into the strategic sector a priority in hopes of lifting Brazil from a long recession.

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 per cent stake in all pre-salt fields.

This freed up Petrobas, which retained a pre-emptive right to select blocks, while opening the door wider to foreign partners. Sixteen companies were accredited for the auction.

COURT DRAMA

Antonio Guimaraes, executive secretary for exploration and production at the Brazilian Petroleum, Gas and Biocombustibles Institute, said Temer's reform had paid off.

“The Brazilian Government worked to improve the business climate for Brazilian oil,” he said.

The big sale started more than two hours late 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.

In his ruling to stop the auction, de Sales said that there was “plausibility” in the arguments requesting an injunction and that he was acting to avoid “any possibility of damage to public assets — especially given the values involved”.

Dilma Rousseff, the leftist president who was removed in an impeachment proceeding last year and replaced by Temer, lashed out against the auction.

“Brazil is handing oil over to foreigners for the price of bananas,” she tweeted.

ADVERTISEMENT




POST A COMMENT

HOUSE RULES

1. We welcome reader comments on the top stories of the day. Some comments may be republished on the website or in the newspaper � email addresses will not be published.

2. Please understand that comments are moderated and it is not always possible to publish all that have been submitted. We will, however, try to publish comments that are representative of all received.

3. We ask that comments are civil and free of libellous or hateful material. Also please stick to the topic under discussion.

4. Please do not write in block capitals since this makes your comment hard to read.

5. Please don't use the comments to advertise. However, our advertising department can be more than accommodating if emailed: advertising@jamaicaobserver.com.

6. If readers wish to report offensive comments, suggest a correction or share a story then please email: community@jamaicaobserver.com.

7. Lastly, read our Terms and Conditions and Privacy Policy



comments powered by Disqus
ADVERTISEMENT

Poll

ADVERTISEMENT
ADVERTISEMENT

Today's Cartoon

Click image to view full size editorial cartoon
ADVERTISEMENT