Brazil’s 10th licensing round results

Brazil

Brazil’s Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (ANP) has declared the results of its recent 10th licensing round, which offered a total of 130 onshore blocks in a mixture of mature and new frontier basins.  For further information concerning the round, please see our previous Law-Now.

The ANP licensed 54 blocks in exchange for signature bonuses totalling almost R$90 million (£25m) and aggregate minimum exploration commitments of around R$611 million (£173m).  Although this is a fraction of the R$2.11 billion (£600m) raised in bonuses alone in last year’s 9th licensing round, the ANP called the round a “great success” and pointed to the fact that it had succeeded in licensing over 40% of the blocks on offer, as compared with an average of around 20% over the previous nine bidding rounds.
 

Nobody expected signature bonuses to reach the level of recent rounds following the decision to exclude all offshore acreage pending an ongoing governmental review of the offshore licensing regime.  Recent massive finds in offshore sub-salt horizons, and particularly the Santos basin, are thought to be capable of yielding from 50 to 100 billion barrels of oil. These potential rewards and the supposedly reduced exploration risk in certain offshore acreage has prompted the government to consider alternatives to the present concession regime, including production sharing contracts or even service contracts.

With Brazil having become self-sufficient in oil in 2006, the ANP stressed that the objective of this 10th licensing round was different from previous rounds.  It was intended to open up new hydrocarbon provinces and boost exploration in Brazil’s interior.  Less than 5% of Brazil’s high-potential sedimentary basins have been explored, so the ANP will consider it a success that blocks were licensed in all of the frontier basins on offer.

The big winner in this auction was Petrobras, which spent R$40 million (£11.4m) to pick up interests in almost half of the blocks that were licensed.  Petrobras consistently top-bid to acquire significant acreage in the Potiguar basin (in partnership with Petrogal and Partex), the Amazonas basin (in partnership with Petrogal) and the Parecis, Sergipe-Alagoas and Recôncavo basins.

Shell meanwhile spent R$11 million (£3.1m) to acquire five blocks in the São Francisco basin.  This new frontier is almost entirely unexplored, but Petrobras and BG Group have acquired acreage there in recent years and this basin is thought to have high potential for natural gas.  Despite crude oil self-sufficiency, Brazil is dependent on natural gas imports from Bolivia.  The hope is that discoveries in this onshore basin, relatively close to Brazil’s population centres, could offer security of supply and support industrial development.

In total, 17 companies, including 6 foreign companies, picked up interests in the 10th licensing round.  However, the ANP may be disappointed that the bidding round did not receive more interest from the big international oil companies.  48 companies were pre-qualified for the round, including BP, ExxonMobil, Sonangol, Anadarko, Hess and OGX, one of Brazil’s leading independent oil companies.
 
In the event, none of these companies elected to bid, perhaps preferring to focus their attention on the bigger prizes offshore.  They will be hoping that the New Year brings good tidings from the government’s interministerial commission, which is due to report its findings on potential changes to the licensing regime in January.  It is to be hoped that they do not depart too radically from the current regime, which has demonstrated again in this 10th licensing round that it is efficient, transparent and effective.