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Brazil's Government Auctions Off 3 of the 4 Pre-Salt Oil Fields, Collecting US$ 807 million

06/08/2018 - 11h00



Brazil's government auctioned off three of the four pre-salt oil fields offered in the fourth round of bidding on Thursday (the 7th), collecting R$ 3.15 billion (US$ 807 million).

According to experts and industry executives, the result demonstrated that the interventionist announcements that the government made, concerning fuel price adjustments, did not affect the appetite that companies had to take over the exploration and production sectors.

At the end of the auction, Décio Oddone, the director general of the National Agency for Oil, Gas and Biofuels (ANP), said that "the result is extraordinary".

Of the three oil fields that were offered, two were heavily disputed, while the third was sold to a consortium led by Petrobras, which offered the minimum bid.

Of the 16 companies registered, 11 submitted offers in seven different consortiums.

Pre-salt oil field
Pre-salt oil field

In pre-salt oil field auctions, the signing bonus does not vary: the consortium that commits to offering more oil to the Brazilian government - once production costs have been discounted - wins. According to Mr. Oddone, the federal government earned a surplus of 202% in terms of oil, guaranteeing an extra R$ 40 billion (US$ 10.3 billion) over the next 30 years - which is approximately how long the contracts last.

The most disputed oil fields were Uirapuru and Três Marias. In both disputes, the consortiums led by Petrobras were defeated.

However, the state-owned company exercised its preemptive right and will compose the winning consortiums. In Uirapuru, it will form a consortium with Portuguese company Petrogal, Norwegian company Equinor (formerly called "Statoil") and American company Exxon. In Três Marias, Petrobras will join American company Chevron and Anglo-Dutch company Shell. However, in both cases, the state-owned company will have a smaller share than it had anticipated since its preemptive right only guarantees a 30% share of the consortium.

In his inaugural address at the beginning of the auction, Mr. Oddone praised the free market and said that companies' freedom to stipulate their own prices would not be tampered with.


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