China’s CNOOC and CNPC, Anglo-Dutch giant Royal Dutch Shell and France’s Total won an auction on Monday to join Brazilian state operator Petrobras in developing the huge “Libra” Atlantic oilfield.
The five energy firms won 35-year concessions, with Petrobras taking a 40 per cent 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 per cent stake with CNOOC and CNPC securing 10 per cent each.
Their consortium was the only bid to offer the Brazilian state the minimum 41.65 per cent of oil to be extracted from the site, which holds an estimated eight 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.
“A bigger success than this is difficult to imagine … it is an absolute success”, said Magda Chambriard, head of oil regulator ANP.
The auction attracted 10 participants, but none from the United States. 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, which pushed up Petrobras shares by four per cent by mid-afternoon.
Analysts had expected China National Petroleum Corporation (CNPC) and China National Offshore Oil Corporation (CNOOC) to land the lion’s share of the deal.
Instead, they both had to settle for less than their Anglo-Dutch and French partners.
Even so, with Libra holding the equivalent of around 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”.
Chambriard, 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 (US$6.9 billion).
Ahead of the auction, ANP estimated the Brazilian government would receive around three quarters of overall Libra profits.
Earlier, five people were reported hurt as union workers opposed to the auctioning off of national assets to foreign companies clashed with police.
More than 1000 police were drafted and responded with tear gas and rubber bullets after some 200 protesters converged on the hotel hosting the action.
Analysts say the Libra field will be able to produce around 1.4 million barrels a day by 2017, according to ANP.
A further spinoff could come in the form of a doubling of Brazilian gas reserves, currently 459.3 billion cubic metres.
The reserves are what are known as pre-salt — that is, they lie beneath a layer of salt deep below the Atlantic Ocean.
Losing out with their bids were Petronas of Malaysia, Japan’s Mitsui & Co, Portugal’s Petrogal, Colombia’s Ecopetrol and ONGC Videsh of India.
Buried under layers of salt, the deposits cover 149,000 square kilometres (58,000 square miles) and Libra lies 183 kilometres (112 miles) off the coast.
Currently, Brazil produces two 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 1,548 square kilometres (597.3 square miles), equating to around ten per cent of Brazil’s overall pre-salt deposits.
Legislation passed earlier this year provide for Brazil’s oil royalties being poured into education and health.
But unions fear the auction constitutes a sell off 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, O Globo daily Sunday quoted the Getulio Vargas Foundation as saying.
Lobao strongly rejects the labor union’s thesis.
“We are not privatising pre-salt oil. On the contrary, we are harnessing these immense riches lying undersea and in the ground,” he said.
Source : Channel News Asia | October 22, 2013