Brazil upstream round draws meager turnout
OREANDA-NEWS. October 08, 2015. Oil companies showed scant appetite for extensive acreage offered in Brazil 13th licensing round today, highlighting the impact of the country deep economic and political troubles combined with the oil price slump and regulatory inertia.
Only 37 blocks, or 14pc of 266 onshore and offshore blocks on offer, were awarded, almost all to unchallenged bidders.
Signature bonuses for the round totaled around R121mn (\\$31.2mn), a fraction of the R2bn the government had expected to attract. The awards yielded an accumulated R340mn in minimum exploration commitments.
Brazilian independent QGEP was the sole bidder for two of 10 deepwater blocks in the Sergipe-Alagoas basin that had been considered among the most attractive. The combined signing bonuses for the two blocks was R100mn, accounting for the bulk of the total. The blocks were the only offshore acreage to be awarded in today round.
State-controlled Petrobras has made several discoveries in Sergipe-Alagoas. The 10 blocks that had been offered there hold an estimated 20bn bl of oil equivalent.
No bids were received for 50 blocks in the deepwater Pelotas basin near the border with Uruguay, or for 19 offshore blocks in the Camamu-Alamada and Espirito Santo basins. Another four offshore blocks in the Jacuipe basin also drew no bids.
France?s Engie partnered with local firm Parnaiba Gas Natural on two onshore Parnaiba basin blocks and with Canada's Alvopetro on four onshore blocks in the Reconcavo basin. Engie is a major power generator in Brazil.
Latin American independent Geopark won two onshore blocks in the Potiguar basin and two in the Reconcavo basin.
A handful of Brazilian independents took the remaining onshore blocks in the Potiguar and Reconcavo basins.
Although turnout was expected to be limited, the final results fell even shorter than anticipated. "We knew it wasn't going to be a great success, but this is much worse than we expected. The government failed to adopt more attractive terms for this round and this is the result," a local executive participating in the round told Argus.
Local industry had urged the government to ease local content rules, but the policy was left virtually unchanged in the contract governing the round.
Local content rules, which require a certain percentage of goods and services be locally sourced, were a major concern as some of Brazil's key construction and engineering companies face financial problems because of a widespread corruption scandal at Petrobras.
Magda Chambriard, director general of the Brazilian oil regulator ANP, blamed lower oil prices for the disappointing turnout.
"Obviously we expected a stronger turnout from foreign companies in the deepwater blocks like Sergipe-Alagoas, but the round still guarantees the viability of Brazil's industry," she said.
The round took place under a cloud of political uncertainty, as president Dilma Rousseff fights off accusations of corruption and mismanagement that could cut short her mandate.
Petrobras, which normally has a strong presence in upstream tenders, was conspicuously absent. This week, the company that has been pummeled by the oil price plunge, a weakened currency and a corruption scandal slashed capital investment for this year and next.