Government grants two pre-salt areas for R$ 11 billion

In an auction with little dispute, the government granted this Friday (17) two areas for exploration and production of oil in the pre-salt. The competition brought in R$ 11 billion and should generate investments of R$ 204 billion.

This Friday’s auction is considered by the market to be the last major offer of blocks for oil exploration and production in the country, given the end of the stock of areas with high potential on the Brazilian coast and growing pressures for the energy transition.

Called Sépia and Atapu, the blocks granted had already been offered to the market at an auction held in 2019, but they did not attract the interest of oil companies. For this second attempt, the value of the signing bonuses was reduced by 70%.

“We privilege investment, the return to society, instead of signing bonuses,” said after the competition the Minister of Mines and Energy, Bento Albuquerque, calculating that activities in the blocks will yield R$ 300 billion in tax revenue during his lifetime useful.

Of the 11 qualified companies, five participated in the competition. In pre-salt auctions, the signature bonus is fixed and the competition is won by the company or consortium that undertakes to deliver the largest portion of production to the government.

There was only dispute for the Sepia area, the most expensive of them: a consortium formed by Total (France), Petronas (Malaysia) and Qatar Petroleum (Qatar) defeated Petrobras. The state-owned company, however, exercised its preemptive right provided for by law and decided to participate in the winning consortium.

The companies will pay bonuses of R$ 7 billion and have pledged to give the Union 37.43% of the field’s oil production, after discounting costs. The value represents a premium of 149.20% over the established minimum.

The Atapu block was purchased by a consortium formed by Petrobras, Shell (England) and Total, which will pay a R$4 billion signature bonus and pledged to deliver 31.68% of production to the Union, a premium of 437.86% . The group was the only one to present a proposal for the area.

“The great news is that we had competition, raising the minimum percentage of oil for the Union,” said Rodolfo Saboia, director-general of the ANP (National Petroleum, Gas and Biofuels Agency), after the auction. “We guarantee resources that will be destined to Brazilian society in the long term”.

Present at the event, the minister of Economy, Paulo Guedes, said that the participation of private companies in the exploration of the areas helps to accelerate the process of development of production in the areas.

Sépia and Atapu are two areas of the so-called transfer of rights surplus, discoveries made by Petrobras during the exploration of blocks it obtained in exchange for shares in its 2010 capitalization process, but which exceed the limits under the control of the state-owned company.

Both already have oil production, with an average of 200,000 barrels per day. The contracts provide for reimbursement to Petrobras for investments already made. The reimbursement value is higher than the price that the company will pay with bonuses, said the company’s Financial Director, Rodrigo Araújo.

At the opening of the auction, Saboia said he “has no doubts” about the attractiveness of the pre-salt, which in his opinion should benefit from the energy transition process, as it is an oil with a lower content of pollutants.

For specialists, the results of the last auctions and the growing pressure for restrictions on fossil fuels indicate that Brazil will no longer have offers of this size. The last auction held by the government, in October, had already been the worst since the opening of the sector, in 1999.

In it, only 5 of the 92 areas offered were auctioned, with a collection of R$ 37 million, the lowest among all the bids ever made by the ANP with the offer of maritime areas. The number of participants was also the lowest in history.

The weak result reflected a lower appetite for risk in the sector, which has been focusing more and more on renewable energies and has not yet managed to explore all the oil areas acquired in recent auctions in Brazil.

At the end of this Friday’s auction, the minister of Mines and Energy said that the Brazilian policy is to encourage the expansion of oil and gas exploration. “We are a developing country with an abundance of resources, which we have to transform into jobs and income,” he said.

He said, however, that the government is moving towards a new auction model, with greater bet on the system known as permanent offer, in which the blocks are in a kind of shop window and are only offered to the market after an interest has been expressed by oil companies.

“This is the trend and this is the way to create an environment in which investors can make their choices,” he said.

In addition, part of the areas were in regions of high environmental sensitivity, such as the Atol das Rocas and Fernando de Noronha archipelagos. The blocks offered in the well-known Campos and Santos basins were at great distances from the coast, with logistical challenges.

The shortage of more attractive areas had already been signaled by former ANP general director Décio Oddone before the last auction under his command, in 2019, when only one of the five areas offered was purchased by a consortium formed by Petrobras and the Chinese CNODC.

In his closing speech at the auction, he said the era of billion-dollar bond auctions was coming to an end. Earlier this month, the government authorized the inclusion of pre-salt areas in this showcase.

Recent experiences show, however, that bonuses tend to be smaller in this model. In the 2020 standing bid round, for example, Shell paid R$12 million for a block in the same region as another one acquired at a conventional auction a year earlier for R$550 million.

Albuquerque also said that there are opportunities in new exploratory frontiers in the country, such as the equatorial margin. In this area, however, there are regions with great environmental sensitivity, such as the Atol das Rocas and Fernando de Noronha archipelagos or the mouth of the Amazon River.

In the Foz do Amazonas basin, there is great expectation of giant discoveries such as those that have created an oil industry in Guyana, but so far no environmental license has been issued for exploration in the region, which has led France’s Total to give up on the region. of its assets in the region.