Brazil's Licence Changes Prove a Hit
Brazil's 14th offshore oil and gas exploration and production round, using new terms and conditions, drew record bonus payments and the state upstream regulator ANR said September 27 that it "marked the re-establishment of the sector in Brazil."
It yielded the largest aggregate amount in signature bonuses in history – over reals 3.8bn (US$1.2bn) – and the largest number offers for blocks. In all, twenty companies competed, 17 successfully, acquiring the rights to 37 blocks; and of those, ten companies are Brazilian.
Brazil's state Petrobras (operator, 50%) and equal partner ExxonMobil paid a record reals 2.24bn (US$704mn) for offshore Campos basin block C-M-346.
The success of the auction reflects the regulatory changes made by the Brazilian government, which have made the business environment more attractive to companies of different sizes, ANR said. These included the adoption of a single exploration phase and the possibility of extending it due to technical reasons; the removal of local content as a bidding criteria; distinct royalties for new frontier areas and mature basins of greater risks; and incentives to increase the participation of small and medium-sized companies.
ANP director-general Decio Oddone said the round marked "a new beginning of investments, after the biggest crisis this sector had ever experienced in Brazil,” referring to the corruption scandal that has beset Petrobras.
He also said there would be two further auctions for the pre-salt areas this year; six more bidding rounds by 2019; and a permanent offer of areas will begin. “These measures will bring hundreds of billions of reais in investments, that is, wealth to the Brazilian society,” he said.
The projection for investments of the Minimum Exploratory Program (series of activities to be carried out by the companies in the first phase of the contract) is reals 845mn .
Blocks are in 16 sectors of eight sedimentary basins: Parnaiba, Potiguar, Santos, Reconcavo, Parana, Espirito Santo, Sergipe-Alagoas and Campos.
ANP will hold October 27, the second and third pre-salt rounds. The ten most productive wells in Brazil are in the pre-salt polygon, which already accounts for half of the Brazilian production.
The second pre-salt round will offer four areas with deposits that are adjacent to fields or prospects whose reservoirs extend beyond the granted area, and may be unitised with them. These areas are related to the discoveries named Gato do Mato and Carcara, and to the fields of Tartaruga Verde and Sapinhoa.
The third pre-salt round will offer four areas located in the basins of Campos and Santos, in the pre-salt polygon, related to the prospects of Pau Brasil, Peroba, Alto de Cabo Frio-Oeste and Alto de Cabo Frio-Central.
Brazil has established a multi-year bidding rounds calendar. In 2018 and 2019, three bidding rounds will be held each year: one for areas with mature accumulations, one for the pre-salt area and one for exploration blocks. The bidding rounds from 2017 to 2019 are expected to generate more than US$80bn in new investments and, throughout the contracts, more than $100bn in royalties.
William Powell