Nine companies dispute 92 oil concessions auctioned by Brazil

RIO DE JANEIRO, BRAZIL – Among the 9 companies registered for Brazil’s 17th Oil Concession Auction are multinationals Shell, Total and Chevron, Australia’s Karoon, Germany’s Wintershall and North American Murphy.

The 9th company authorized to register by the National Petroleum Agency (ANP) is Brazil’s 3R Petroleum, a small oil company dedicated to exploiting mature wells leased by Petrobras, which in May raised US$155 million with its debut on the São Paulo stock exchange.

According to the regulator, 92 concessions “located in 11 high potential and new frontier sectors” in 4 different Brazilian sedimentary basins in the Atlantic Ocean will be offered at Thursday’s auction.

Three of these sectors are located in the Campos basin and another 3 in the Santos basin, Brazil’s main and oldest oil production areas, while the Pelotas basin, with 3 sectors, and the Potiguar basin, with 2, are areas still under exploration but with great potential.

The winners of the auction will be the companies offering the highest value for the concession, a criterion that will carry 80% weight, and which simultaneously propose the most ambitious exploration program in their first months of operation (20%).

The bids will have to exceed the minimum value established by the ANP for each concession, which varies between R$630,000 (US$116,667) for the Pelotas basin and R$122.2 million for the Santos basin.

The 17th Concession Auction was scheduled for last year but was postponed due to the Covid pandemic.

PREVIOUS AUCTION YIELDED RECORD VALUE

In its last concession auction, in October 2019, the ANP raised a record R$8,915.9 million for licenses to exploit 12 of the 36 areas auctioned.

This was the highest value raised by Brazil in the 16 oil concession auctions it has organized since 1999, when it put an end to the monopoly of state-owned Petrobras to exploit oil in the country.

The big winners in the 2019 auction were Spain’s Repsol, which obtained 1 concession individually and another 3 in a consortium with U.S. Chevron and Germany’s Wintershall; Malaysia’s Petronas (1 concession individually and another 2 in consortia), and Britain’s BP Energy (1 individually and another in a consortium) and Shell (2 in consortia).

Of the 17 companies registered for the 2019 auction, of which only 2 were Brazilian (Petrobras and Enauta), 11 placed bids and 10 were awarded concessions.

Despite expectations surrounding the new auction, which will assess the appetite of oil companies for Brazil after the pandemic, it has been controversial due to its proximity to sensitive marine ecosystems in some of the areas offered.

Several environmental groups have planned demonstrations on Thursday outside the Rio de Janeiro hotel where the auction will be held to protest against the offer of oil rights in sensitive areas without proper environmental impact studies.

In addition, the holding of the auction is dependent on whether a judge or court will accept the 4 lawsuits and 2 injunctions lodged by political parties and environmental organizations in an attempt to suspend it.

According to environmentalists, the most risky concessions are being offered in the Potiguar (Brazil’s northern coast) and Pelotas (south) basins as they are close to areas with a rich marine biodiversity, where important species for fishing reproduce and where endangered animals, such as the blue whale, migrate.

“Oil exploration and exploitation operations in these areas, if granted, will entail high levels of risk and the danger of eventual spills of low, medium and high volume. In addition, the operation itself will result in losses for fishing production and tourism,” assures Arayara environmental organization, which is coordinating the protest against the auction.

The same organization recalled that the directors of oil companies, banks and investment funds have alerted to the legal and environmental risk of exploitation in these areas, and that in the past multinationals such as French Total withdrew from concessions in Brazil due to the controversy generated by their intention to operate in regions with potential danger to the environment.