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Shell wins three oil blocks in Brazil's deepwater

Published 10/27/2017, 03:20 PM
© Reuters. Brazil's oil regulator ANP chief Decio Oddone speaks during a deepwater pre-salt oil auction in Rio de Janeiro
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By Marta Nogueira and Alexandra Alper

RIO DE JANEIRO (Reuters) - Oil major Royal Dutch Shell Plc (L:RDSA) won half the blocks awarded in Brazil's deepwater oil auction on Friday, while rival BP (L:BP) took two blocks and Exxon Mobil Corp (N:XOM) took one in a historic opening of the pre-salt play to foreign operators.

Brazil awarded six of the eight blocks on offer in the auction for the rights to pump oil from the country's coveted pre-salt region, where billions of barrels of oil are trapped below thousands of feet of salt in the country's Atlantic waters.

The wins will bolster Shell's position as the largest foreign operator in Brazil's offshore oil sector, second only to state-run oil giant Petroleo Brasileiro (Petrobras) (SA:PETR4).

The Anglo-Dutch oil major won one area in consortium with France's Total SA (PA:TOTF), another with Petrobras and Repsol-Sinopec, and a third with Qatar Petroleum International (QPI) and China's CNOOC.

Shell has said it is confident it can pump from the pre-salt fields at below $40 a barrel.

Rival BP Plc (L:BP), which is active in Brazil but not yet producing oil, took two more blocks on Friday.

"We see the government of Brazil being more supportive of foreign companies entering Brazil," BP Latin America President Felipe Arbelaez said after the rounds.

"There are high quality assets. We believe that the assets here will be resilient in any price environment."

Brazil earned 6.15 billion reais ($1.88 billion) in signing bonuses for the six fields that it awarded in the auction.

President Michel Temer's government has enacted reforms to make the energy sector more attractive to foreign investment, and for the first time international oil firms will be allowed to operate fields in the pre-salt.

Countries worldwide sitting on oil and gas reserves are keen to pump it before it becomes less valuable as global policies to address climate change kick in.

The opposition in Brazil has opposed some of the reforms, and the auction was delayed by three hours on Friday after a federal judge issued an injunction to suspend the process at the behest of the leftist Workers Party.

That left top executives from the world's largest oil companies milling around in the hotel that hosted the auction, in an upscale seaside neighborhood in Rio de Janeiro.

EXXON

In a twist, U.S. major Exxon Mobil, whose 10-block win in last month's Brazilian auction was seen by many as a prelude to a big play on Friday, took just one block as part of a consortium with Norway's Statoil ASA (OL:STL) and Portugal's Petrogal [PETP.UL], a unit of Galp Energia (LS:GALP). Two blocks got no bids.

The quality of reserves and the reforms have made Brazil an important target for oil majors, even though they have had less appetite for capital-intensive mega projects since crude prices crashed in 2014.

Brazil has high hopes for the volume of oil the companies can pump from the blocks. Brazilian oil output could double to more than 5 million barrels per day (bpd) by 2027, compared with the 2.6 million bpd produced in August, regulator ANP said on Thursday.

© Reuters. Brazil's oil regulator ANP chief Decio Oddone speaks during a deepwater pre-salt oil auction in Rio de Janeiro

($1 = 3.2652 reais)

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