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Brazil seeks US$50B through auction of oil blocks
Guyana’s neighbour Brazil hopes to reel in about US$50B from an auction of four oilfields, tentatively set for next Wednesday – Buzios, Itapu, Atapu and Sepia. The fields involved in the ‘Transfer of Rights’ process could hold about 15B barrels of oil equivalent, according to a study by Houston-based consultancy Gaffney, Cline & Associates. The fields draw from the pre-salt layer, which it is thought holds a significant fraction of the earth’s petroleum reserves.
Wood Mackenzie estimates that the four projects could be producing about 1.4M barrels per day by 2030.
Buzios, the largest of the four, considered by ExxonMobil to be the “largest and most prolific” deepwater discovery ever. The field is Brazil’s second largest when it comes to production, currently putting out about 425,000 barrels per day.
While Petrobras is intent on winning the bidding for that project, ExxonMobil’s President of Exploration, Stephen Greenlee said that the company needs to weigh just how much it wants to spend on the lucrative project against US Shale, other liquefied natural gas and deepwater projects, according to Bloomberg. But still, along with 13 other producers, Exxon has signed up to participate in the auction.
In Guyana, for instance, the oil major is set to start production on the Stabroek Block in December with its partners CNOOC Nexen and Hess.
Of the Brazil auction, Greenlee is quoted as saying, “Whether or not we participate, it would be wrapped up in how we would see that opportunity versus all the other investment options, because there are a lot of investment options out there right now.”
He reportedly argued that other oil companies have also expressed reservations about the cost to obtain those blocks that the billions in signing bonuses could eat into their profits. Total, Repsol, and BP have said that they will not participate in the auction.
ExxonMobil holds interests in 30 other blocks in Brazil, which it got when they were way less expensive. The four fields being auctioned on Wednesday offer a unique situation because the reserves have already been proven, as is the case with Guyana when it signed the 2016 Production Sharing Agreement (PSA) with Exxon, but only got US$18M.
Bloomberg reported that due to the investments Petrobras has already made in the area, it is set to be reimbursed by oil companies to the tune of US$25B, according to Government officials with knowledge of the matter. The licensing fees are set to reel in the other US$25B.
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