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Brazil's 4th Pre-salt Round extremely successful has US$818 million collected in signature bonuses

ANP

Petrobras forced to run with second-choice consortium for coveted block in Brazil's fourth pre-salt licensing round

By Fabio Palmigiani and Gareth Chetwynd

RIO DE JANEIRO
Petroleumworld 06 08 2018

Petrobras won the high-profile Uirapuru area in the Santos basin in the opening bid of Brazil's fourth pre-salt round, but was unable to do so with its first choice of partners.

A consortium formed by Portugal' Galp Energia, Norway's Equinor and ExxonMobil of the US submitted the winning bid, offering a profit oil share for the federal government of 75.49%, defeating for the first time a Petrobras-led group in a pre-salt round.

Petrobras, in partnership with France's Total and BP of the UK proposed a profit oil of 72.45%, followed by Chevron-Shell-Qatar Petroleum International on 72.05%, and a Chinese consortium made up of China National Offshore Oil Corporation and China National Oil & Gas Exploration & Development Corporation on 68.15%.

Months ago, Petrobras exercised its preferential rights for Uirapuru with a minimum 30% stake and, as a high bid was submitted by a different consortium, the company had a 30-minute window to decide whether or not to join.

Petrobras opted to enter the winning consortium, taking its 30% operatorship at Uirapuru. Galp will take a 14% interest, while Equinor and ExxonMobil will keep 28% each.

Uirapuru is located immediately to the north-east of the Equinor-operated Carcara pre-salt discovery.

The government asked for a fixed signature bonus of 2.65 billion reais ($679.5 million) for Uirapuru and a minimum share of profit oil of 22.18%.

In the second area on offer, Petrobras faced no competition and picked up the Dois Irmaos pre-salt area in the Campos basin by submitting the minimum profit oil of 16.43%.

Petrobras led the consortium with a 45% stake, partnered by Equinor (formerly Statoil) on 25% and BP on 30%. The trio committed to pay a fixed signature bonus of 400 million reais.

There was more drama in the third area on offer Tres Marias in the Santos basin in which Petrobras also exercised its preferential rights in a partnership with Total and BP, but was outbid by a consortium made up of Chevron and Shell.

This time the difference in the respective bids was higher, with Chevron-Shell offering a profit oil share of 49.95%, while the Petrobras-led group bid just 18%.

As it did in Uirapuru, Petrobras decided to enter the winning consortium with an operating 30% stake, partnering Shell on 40% and Chevron on 30%.

Tres Marias is located between the Jupiter and Libra pre-salt discoveries. The government asked for a minimum profit oil share of 8.32% and a fixed signature bonus of 100 million reais.

The last area on offer in the fourth pre-salt round, Itaimbezinho in the Campos basin, failed to attract a single bid.

After the auction, consultancy Wood Mackenzie weighed in.

"With industry heavyweights again leading the competition, Brazil`s pre-salt has consolidated as the playground for those with deep pockets," said Juliana Miguez, senior research analyst for Latin America upstream oil and gas.

"High interest from a select group of companies and strong competition in the rounds are a reflection of the prospectivity of the acreage. The crown however still belongs to Petrobras."

Companies' bids of more than 70% profit oil reinforce their belief in the economics of the projects, with the basis in huge accumulations and very prolific wells, Wood Mackenzie continued.

"In the case of PSC blocks, economics are very sensitive to profit share levels, and high bids such as for Uirapuru will require significant discoveries, low costs and a fast pace of development in order to generate value."

Overall, however, the results were seen as another win for the sector.

"Ultimately, with US$818 million collected in signature bonuses, the outcome was yet another big success for Brazil and, for the majors, it was a chance to significantly deepen their pre-salt exposure," the firm concluded.

"With the successful conclusion of five licensing rounds in the span of less than a year, and a fifth PSC Round set for September 2018, interest in Brazil's upstream sector continues to be very strong."

________________________

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Story by Fabio Palmigiani and Gareth Chetwynd from Upstream.


upstreamonline.com 06 07 2018

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