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17th Auction Round of the Federal Government Faced Controversies for Involving Blocks Close to Important Environmental Protection Areas
The Federal Government was unsuccessful in selling the rights for exploration and production of one of the most promising offshore oil and gas blocks for sale on Thursday (07), as its first oil auction since the onset of the pandemic raised only R$ 37.1 million ($ 6.7 million) for state coffers.
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In total, there were 92 blocks in contention across four offshore basins. The combined minimum bids for all oil and gas blocks were R$ 558 million, although only five blocks were auctioned, all in the Santos Basin, on Brazil’s southeastern coast.
Shell auctioned four blocks for about R$ 30.5 million. It also won a fifth block, known as SM-1709, in a 70%-30% joint bid with the Colombian Ecopetrol worth R$ 6.6 million.
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The Federal Government expected the auction round to be small by local standards, given the marginal attractiveness of the oil and gas blocks in contention. However, the results of Thursday’s round were the lowest in local currency terms since 2003.
Federal Government Auction Was the Lowest Since 2003
Some of the blocks for sale generated speculation that they contained part of a productive geology of the pre-salt, an area where billions of barrels of oil are trapped beneath a layer of salt on the ocean floor.
Collectively, these blocks had a combined minimum signing bonus of about R$ 270 million, but none received a bid. Some of the oil and gas blocks in contention were also located near ecologically sensitive marine reserves, including the archipelagos of Fernando de Noronha and Abrolhos, a fact that attracted scrutiny from environmental groups. None of these blocks attracted bidders.
ANP Director General Rebuts Criticism and States That Auction Was a Success
In a press conference shortly after the auction, Rodolfo Saboia, head of the National Agency of Petroleum, Natural Gas, and Biofuels – ANP, stated that the “results of the bidding round were a success, given the high exploratory risks of the blocks in contention”.
“Many companies drafted their exploration and production budgets for 2021 during the worst of the pandemic in 2020”, he added.
Nine companies registered for the bidding round, including: Petrobras, Chevron, Shell, TotalEnergies, Ecopetrol, Karoon Energy, Wintershall Dea AG, and 3R Petroleum. This was the lowest number to date for an oil and gas rights auction in Brazil.
Petrobras Chooses PetroRio Group as Highest Bidder for Albacora
The PetroRio-Cobra bid surpassed a competing offer made by a consortium composed of private equity firm EIG Global Energy Partners, alongside Brazilian companies Enauta and 3R Petroleum.
Both consortia also submitted bids for the neighboring oil field of Albacora Leste, according to Reuters. The exact values of the bids were not clear, although Petrobras stated at the end of September that the bids received “might exceed $ 4 billion for the two fields”.
Petrobras is currently selling dozens of assets in an attempt to reduce debt and sharpen its focus on a prolific offshore oil production area known as the “Pre-salt” zone.
Albacora produced 43,000 barrels of oil equivalent per day (boepd), according to documents released by Petrobras, when the company launched the sales process in 2020. Albacora Leste produced 34,000 boepd at the time.
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