Eleven multinationals to compete in auction to exploit two gigantic oil fields in Brazil

RIO DE JANEIRO, BRAZIL – Eleven multinationals will compete this Friday in an auction in which Brazil will offer rights to exploit part of two gigantic oil fields discovered by the state-owned Petrobras and which have reserves estimated by the Government at 12 billion barrels of crude oil.

This is the second round of bids for the surplus volumes of the onerous sssignment, in which the National Petroleum Agency (ANP, regulator) will offer to the highest bidder the rights to exploit part of the reserves discovered in the Sepia and Atapú fields, located in very deep waters of the Atlantic Ocean.

Eleven multinationals have registered for the bidding, including the large multinationals in the sector, such as Shell, Chevron, ExxonMobil, and Total Energies.

Also registered are companies that already have essential assets in Brazil, such as Colombia’s Ecopetrol, Norway’s Equinor, Qatar’s QP, Malaysia’s Petronas, Portugal’s Petrogal, and Brazil’s Enauta.

Petrobras is also registered in the auction even though the company exercised its right of first refusal in both fields because it was the discoverer of the fields, which entitles it to act as operator and to have a minimum participation of 30% in each area.

According to ANP estimates, the winners of the auction will have to make investments of R$204 billion (US$36.4 billion) to develop production in both areas.

Sepia and Atapú, located in the Santos marine basin, off the coast of the states of São Paulo and Rio de Janeiro, have already proven reserves in the pre-salt, the exploitation horizon that Brazil discovered in very deep waters of the Atlantic under a layer of salt two kilometers thick.

The contract by which Petrobras obtained the rights to all the areas of the so-called Cesión Onerosa, which also includes the gigantic reserves of Búzios and Itapú, foresees that the state-owned company may extract up to 5 billion barrels from them and that it will have to share with other companies whatever exceeds this volume.

But in Sepia and Atapú alone, the Government estimates that there are 12 billion barrels of crude oil, equivalent to Brazil’s current proven reserves, according to figures released last week by the Brazilian Minister of Mines and Energy, Bento Albuquerque.

According to the minister, this volume is equivalent to Brazil’s current proven reserves (12,714 million barrels) and one-eighth of the country’s probable reserves (100 billion barrels), so that their exploitation will raise the country from seventh to fifth place in the list of the world’s largest crude oil producers.

The two reserves were offered in a first auction in 2019. Still, no company was interested, which forced the Government to modify the rules to raise the attractiveness of the assets and reduce the doubts about the compensation that the winners will have to pay Petrobras for what has already been invested.

The Government also reduced the value that the winners will have to pay for the licenses and the volumes of oil they will have to deliver to the State, with which they will sign a partnership agreement.

Under the new rules, the winner of the auction for the rights to exploit Sepia’s surplus volumes will have to pay R$7.13 billion (about US$1.28 billion) for the license and give the State at least 15.02% of its production.

The company that wins the rights to Atapú will have to pay R$4 billion (about US$718 million) for the license and give the State at least 5.89% of its production.

The price of the licenses was reduced by about 70 % with respect to the 2019 auction and the State’s share in production by almost one-third.

The auction winner will be the company that increases the share it will give to the State in the production of each reserve from a minimum of 15.02% in Sepia and 5.89% in Atapú.