Statoil, Exxon Tops in Brazil Bids - Updates with Shell

(Adds statement from Shell at end)

Norwegian Statoil said October 27 that it, the US major ExxonMobil and Portugal's Galp were the high bidders for a production sharing contract for the Carcara North block in Brazil's second pre-salt offshore licensing round held that day.

Statoil also announced it expects to raise almost $1.2bn net by selling down its stake in BM-S-8 block, adjacent to Carcara North.

The consortium comprising Statoil (operator, 40%), ExxonMobil (40%) and Galp (20%) presented the winning bid (67.12% of profit oil) for the block, in the Santos basin, with the pre-determined signature bonus to be paid by the consortium being Reals 3bn, or about $910mn (Statoil share: $364mn). Galp added that the drilling of an exploration well is among the commitments made by the consortium; it converted the signature bonus as $930mn.

Many Santos basin fields have also produced associated gas, but the Statoil statement makes no reference to this.

Statoil, ExxonMobil and Galp have also agreed a number of transactions in the adjacent BM-S-8 block to align equity interests across the two blocks that together comprise the Carcara oil discovery, the aggregate total potential consideration to be received by Statoil of these being $1.55bn (with a potential net cash inflow to Statoil of $1.19bn). These include Statoil divesting half (33% of currently 66%) its interest in BM-S-8 to ExxonMobil for some $1.3bn, comprising $800mn upfront cash and a contingent cash payment of $500mn. Additionally, upon future closing by Statoil of its acquisition of a 10% interest held by Brazil's Queiroz Galvao, Statoil would onsell 3.5% to Exxon and 3% to Galp for some $250mn ($155mn cash and $95mn contingent).

As a result, both Statoil and ExxonMobil would have a 36.5% interest in BM-S-8 and a 40% interest in Carcará North, with Galp having 17% and 20% respectively. Partners in Carcara North also agreed that Statoil will be operator for the unitised field development, subject to government approval.

"This further strengthens Statoil's presence in the prolific Brazilian pre-salt area and these transactions help build a strong and aligned partnership across the two Carcara blocks," said Statoil CEO Eldar Saetre, adding that the partnership was targeting first oil from Carcara in the mid-2020s. Closing of the transactions with ExxonMobil and Galp is subject to customary conditions, including partner and government approvals.

Shell Extends Acreage

Anglo-Dutch major Shell, French Total and Cnooc also won blocks, including one adjacent to its Gato do Mato field (Shell 80% operating, Total 20%); an area now unitised to the Sapinhoa field (Petrobras 45% operating, Shell 30%, Repsol 25%); and the new Alto de Cabo Frio – West block (Shell 55% operating, Qatar Petroleum 25%, Cnooc 20%).

“We are very pleased to expand our number of operated fields in Brazil,” said Andy Brown, Upstream Director, Shell. “These winning bids were submitted after our thorough evaluation and add strategic acreage to our already leading set of global deep-water growth options. We will determine our next steps with a focus on continued value to Shell and our shareholders. Our deep-water expertise is well-suited for the opportunities that lie ahead.”

ANP Issues Results

Brazil's upstream regulator and licensing authority ANP said October 27 that, of the eight blocks offered in the auctions, six were acquired, generating Reals 6.15bn in signature bonus and Reals 760mn in investments. "Brazil is back to the global oil market scene", said ANP's chief Decio Oddone. It listed full results as follows.

*Operator

Mark Smedley