64 Firms to Bid on Brazil Oil Blocks

By Maria Lopez Conde, Contributing Reporter

RIO DE JANEIRO, BRAZIL – Sixty-four out of the 71 national and international companies that filed requests with the Brazil’s National Petroleum Agency (ANP) will be allowed to bid for Brazilian exploration blocks this May, the oil regulator announced. This represents a modest increase from the 61 firms that participated in the last round of auctions of this kind in 2008.

Billionaire Eike Batista’s OGX Petróleo e Gás, Recife-based conglomerate Queiroz Galvão and state-owned Petrobras are among the Brazilian companies confirmed for the country’s 11th bidding round.

The list of firms also includes major oil and gas players from abroad, like Anglo-Dutch Shell, the Malaysian government’s Petronas and American energy giants, Exxonmobil, Chevron and ConocoPhillips.

A total of 289 blocks totaling 155,800 sq. kilometers will be available to bidders. These are located in eleven sedimentary basins across Brazil, such as: Ceará, Espírito Santo, Parnaíba, Pernambuco, Paraíba, Rio Grande do Norte, Recôncavo, Tucano, Sergipe-Alagoas and the promising Equatorial Margin area that comprises Barreirinhas, Foz do Amazonas and Pará-Maranhão.

Out of the 289 blocks, 166 are offshore with 94 in deepwater fields, 72 are in shallow water and the remaining 123 blocks are located on land. Brazil’s 11th bidding round, approved by President Dilma Rousseff in January, will take place at Rio de Janeiro’s Royal Tulip Hotel on May 14th and 15th. The local content rules will be the same as outlined by 2008’s auction.

The highly anticipated auction comes after a five-year hiatus that complicated the long-term business strategy of foreign oil companies in Brazil. Also, the bitter debate over the royalties distribution law had threatened to delay the auction further.

May’s bidding round does not include any blocks in Brazil’s rich pre-salt layer, which are set to be auctioned off later this year. According to ANP, Brazil is planning to offer up to 40 million oil barrels in its pre-salt layer to companies in November.

Discovered in 2007, pre-salt oil deposits are Brazil’s largest energy reserves. They are located below a layer of salt that can be up to 2,000 meters thick, and is buried under kilometers of rock in the Atlantic, which means its extraction is expensive and cumbersome. It is estimated that nearly 100 billion barrels of high-quality oil could be contained within Brazil’s pre-salt region.

The upcoming auctions of Brazilian oil and natural gas blocks to be held in May and November, in addition to unconventional and tight gas concession auctions scheduled for December, should increase extraction in Brazil, invigorating oil production in the country. This should help Brazil reach oil self-sufficiency by 2014, Petrobras announced last week.

“Beginning in 2014, oil production in Brazil will again reach self-sufficiency, that is, it will produce the same amount of volume of oil that it consumes, taking Petrobras’ production into account, as well as the production of partners and third parties,” the company said in a statement. The last time Brazil produced enough oil to meet its demand was in 2006.