A successful start to a series of potentially huge auctions of Brazilian oil fields cheered the cash-strapped government and put a smile back on the face of a sector hammered by corruption scandals.
Wednesday’s auction in Rio de Janeiro saw only 37 of 287 exploration blocks find buyers.
However, that lackluster result was more than offset by a big-spending alliance between Brazil’s national champion Petrobras and Exxon Mobil Corp.
Photo: AFP
The bottom line was US$1.2 billion in sales, compared with what National Petroleum Agency director Decio Oddone said had been his expectation of about US$157 million.
“This shows that by creating an environment favorable to investment, foreign businesses are again starting to think of Brazil as an option,” Brazilian Minister of Mines and Energy Fernando Coelho Filho said.
In the single biggest deal, Petrobras and Exxon Mobil snapped up a block in the offshore Campos region — bordering the even deeper water and hugely rich “pre-salt” zones — for a record 2.24 billion reais (US$700 million).
That leaves the center-right government of Brazilian President Michel Temer licking its lips, because Wednesday’s sales were just a curtain-raiser to the real action when pre-salt fields will go under the hammer.
The idea is that by privatizing a slew of state-run enterprises and, particularly, loosening up protectionist policies in the oil sector, Brazil can bring back investors and repair the damage of a prolonged recession.
Brazil plans nine rounds of auctions that it hopes will rack up as much as US$80 billion by the end of 2019.
Major oil companies — such as Petrobras and Exxon Mobil — will be gearing up for the next round on Oct. 27, featuring the ultra-deep, pre-salt fields.
Pre-salt areas are seen as among the richest in the world, albeit requiring the technical capabilities to drill in such hostile conditions.
Twenty-five companies have expressed interest in eight pre-salt blocks on offer, the Ministry of Mines and Energy said this month.
Wednesday’s auction provide a chance for Petrobras to continue rebuilding after a huge embezzlement and bribery scandal implicated its leadership and many top political figures.
However, they are also potentially a feast for other global players looking to get involved in Brazil’s enormous, if hard to access, reserves.
One factor dampening the enthusiasm, however, is the risk of running into snags raised by environmental regulations.
“The main thing holding the market back is linked to environmental problems,” said Victor Martins, a former director of the petroleum agency.
Many of the blocks that failed to find buyers on Wednesday are the subject of court action, he said.
Underlining the controversy, demonstrators from ecological protection groups protested right outside Wednesday’s auction room in a wealthy Rio neighborhood.
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