Pre-Sal Auction Fails to Meet Expectations of Brazilian Government

Only two of the four areas are sold; investors react bad and dollar rises 2.2%

Rio de Janeiro

The pre-salt mega-auction failed to meet the Brazilian government’s expectations. Only two of the four areas were sold—without competition and at minimum bids.

The Brazilian government earned R$ 69.9 billion (US$ 17.5 billion), well below the R$ 106 billion (US$ 26.5 billion) projected by the government.

A logo of Brazil's state-run Petrobras oil company is seen at their headquarters in Rio de Janeiro, Brazil October 16, 2019. REUTERS/Sergio Moraes - REUTERS

Petrobras and Chinese state-owned companies CNOOC and CNODC were the only ones to present proposals.

The federal government will keep R$ 23 billion (US$ 6 billion). As a group, states and municipalities will each receive R$5.3 billion (US$ 1.3 billion). Located in front of oil reserves, Rio gets R$ 1.1 billion (US$ 276 million).

Petrobras will receive R$ 34 billion (US$ 8 billion) as compensation for changes in oil prices after signing the assignment agreement in 2010. Discounting this amount, a company will have have to pay R$ 29 billion (US$ 7 billion) for the offers realized yesterday.

The result displeased investors, and the shares of the oil company fell by 5%. The preferred shares close with 0.43%.

Under pressure, the dollar rose by 2.2%. The price of R$ 4.08 was the highest since October 21.

Translated by Kiratiana Freelon

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