Brazil auctions reserves that could elevate it to fifth largest producer of crude oil

Brazil will hold an auction next week for the rights to exploit oil reserves that have some 12,000 million barrels of crude oil, equivalent to the country’s current proven reserves, and whose extraction could make it the fifth largest oil producer in the world.

The winners of the auction on December 17, for which ten large multinationals are registered, will have to make investments of 204,000 million reais (about US $ 36,624.8 million) to develop production in those areas.

The figures were released on Thursday by the Brazilian Minister of Mines and Energy, Bento Albuquerque, at a press conference with foreign correspondents in Brazil.

“This auction will increase our oil reserves by about 12%, which is not little for a country that is already the seventh largest producer of crude oil in the world, and that will allow us to enter among the five largest world producers in 2030″ Stated the minister.

According to Albuquerque, the estimated 12,000 million barrels of oil contained in the Sepia and Atapú fields are equivalent to Brazil’s current proven reserves (12,714 million barrels) and one eighth of the country’s probable reserves (100,000 million barrels).

In the auction, rights will be offered to exploit the surplus volumes that the Brazilian Petrobras discovered in Sepia and Atapú, two areas in the Santos marine basin with hydrocarbons tested in the pre-salt, the horizon with gigantic reserves that Brazil treasures in very deep ocean waters Atlantic below a layer of salt two kilometers thick.

The contract by which Petrobras was awarded the rights to exploit the two areas, it foresees that the state company will have to cede to other companies, although it will be able to remain as operator with a 30% stake, which exceeds 5 billion barrels.

The huge surpluses attracted the interest of giants like Shell, Chevron, Total, ExxonMovil and even the Colombian Ecopetrol, which are registered to dispute the so-called Second Round of Bids for the Surplus Volumes of the Onerous Assignment.

The two reserves were offered in a first auction in November 2019 but no company was interested, forcing the government to modify the bidding rules to increase the attractiveness of the assets.

“After the lessons learned in the first auction, we perfected the bidding process in the last two years and managed to remove all the uncertainties that scared the companies away, mainly regarding the compensation that the winners will have to pay Petrobras for what has already been invested.”Said the minister.

The senior official added that the government also reduced the value that the winners will have to pay for the licenses, as well as the volumes of oil that they will have to deliver to the state, with which they will sign an association agreement.

Under the new rules, the winner of the auction for the rights to exploit the excess volumes of Sepia will have to pay 7.13 billion reais (about US $ 1.28 billion) for the license and deliver at least 15.02% of its production to the state.

The company that wins the rights to Atapú will have to pay 4 billion reais (about US $ 718 million) for the license and deliver at least 5.89% of its production to the State.

In other words, the price of licenses was reduced by about 70% compared to the 2019 auction and the State’s participation in production by almost a third.

According to the minister, the new rules were defined after conversations with several of the interested parties and finally eleven companies registered for the auction, although one announced its withdrawal this week.

“These ten companies will surely guarantee a good competition in the auction on December 17 and will be awarded the two areas offered“, He said.