China National Offshore Oil Corp (CNOOC, 中國海洋石油), China National Petroleum (CNPC, 中國石油天然氣), Anglo-Dutch giant Royal Dutch Shell and France’s Total joined Brazilian state operator Petrobras on Monday in winning production rights to the huge “Libra” Atlantic oilfield.
The five firms won 35-year concessions, with Petrobras taking a 40 percent stake, more than the minimum required by the terms of Brazil’s offer, which has been controversial at home.
Shell and Total both earned a 20 percent stake, while CNOOC and CNPC secured 10 percent each. Their consortium was the only bid to offer the Brazilian state the minimum 41.65 percent of oil to be extracted from the site, which holds an estimated 8 billion to 12 billion barrels of oil.
To put that into context, Brazil currently has 15.3 billion barrels of proven reserves and is already the second-largest in South America after Venezuela.
Brazilian President Dilma Rousseff hailed the auction’s outcome, calling it a “success” that would bring about a “small revolution” in the country.
Brazilian Finance Minister Guido Mantega said the government was “very satisfied.”
“We are talking about ... 41 percent of a very big cake — so we are very satisfied with this stake,” he added.
The auction attracted 10 participants, but none from the US. US firms saw too many strings attached, including major state intervention via Petrobras, which will enjoy sole operator status.
A further concern was the creation of a new state company, PPSA, to oversee offshore exploration.
Spain’s Repsol pulled out just ahead of a decision, unveiled at a hotel in Rio.
Analysts had expected CNPC and CNOOC to land the lion’s share of the deal.
Instead, they each had to settle for less than their Anglo-Dutch and French partners.
Even so, with Libra holding the equivalent of about three years worth of ever-rising Chinese consumption, China’s state firms were keen to come aboard.
Brazilian Energy Minister Edison Lobao indicated Libra will transform the country’s energy scene and “more than duplicate its reserves inventory of proven oil reserves.”
Magda Chambriard, head of oil regulator Natinal Petroleum Agency (ANP), said that Libra would produce “300 billion reais [US$150 billion] in royalties” alone.
The concessions are for developing huge so-called “pre-salt” oil deposits found six years ago in deep water off Brazil’s Atlantic coast.
The winning consortium will have to pay a signing fee of 15 billion reais.
Ahead of the auction, ANP estimated the Brazilian government would receive about three-quarters of overall Libra profits.
Analysts say the Libra field will be able to produce about 1.4 million barrels a day by 2017, according to ANP.
Buried under layers of salt, the deposits cover 149,000km2. Libra lies 183km off the coast.
Currently, Brazil produces 2 million barrels a day, but hopes to boost output to 4.3 million a day by 2020, thanks in large part to the pre-salt reserves.
Libra alone covers 1,548km2, equating to about 10 percent of Brazil’s overall pre-salt deposits. Legislation passed earlier this year provide for Brazil’s oil royalties to be poured into education and health.
However, unions fear the auction constitutes a selloff of national assets and last week Petrobras workers began an indefinite strike in protest.
However, analysts estimate the deal could boost employment and raise Brazilian GDP by US$1.7 trillion over 30 years, the O Globo daily quoted the Getulio Vargas Foundation as saying.