By Gram Slattery, Marta Nogueira and Sabrina Valle
RIO DE JANEIRO (Reuters) – The world’s top oil majors will compete in Brazil on Friday for the chance to snatch up some of the world’s most coveted offshore oilfields, a test of the nation’s investment climate and of large oil producers’ willingness to keep spending big on traditional assets.
Eleven companies, ranging from Exxon Mobil Corp to Royal Dutch Shell PLC to relatively small local players, are signed up to bid for two fields, known as Sepia and Atapu. The assets, both located in a prolific offshore oil formation known as the ‘pre-salt’, have a combined signing bonus of 11.14 billion reais ($1.96 billion), with the government asking 7.138 billion reais for Sepia and 4.002 billion reais for Atapu.
Brazil attempted to sell off both fields in 2019, though neither received bids, even from state-run Petroleo Brasileiro SA, or Petrobras. At the time, complex legal issues and rich signing bonuses kept oil majors away.
This time, bidding terms are considered more attractive, according to several industry sources consulted by Reuters, thanks largely to big cuts in signing bonuses. The government has also cut the percentage of oil that must be turned over to the state, known as “profit oil”, from 26.23% to 5.89% at Atapu and from 27.88% to 15.02% at Sepia.
“Based on the interactions we’re having with CEOs, we are expecting competition,” Rodolfo Saboia, the head of Brazil’s oil regulator, told Reuters.
Potential bidders include a consortium composed of Petrobras, Exxon and Petrogal, a subsidiary of Portugal’s Galp Energia SGPS SA, Reuters reported on Thursday. Exxon declined to comment on the matter, while neither Petrobras nor Galp immediately responded to comment requests. Almost all the parties have held at least preliminary talks with banks or operational partners.
The fields are considered attractive as Petrobras has already discovered commercially recoverable oil in both blocks, eliminating exploration risk.
If both fields are awarded, they could boost Brazilian oil production by 12% over the next decade and bring in almost $40 billion in investment, the nation’s Energy Ministry said on Monday. Petrobras would receive $6.2 billion in compensation for past investments in the two fields.
The 11 companies signed up for the auction, scheduled for 10 a.m. local time (1300 GMT), are: Petrobras, Exxon, Shell, Petrogal, Chevron Corp, Ecopetrol SA, Equinor ASA, Enauta Participacoes SA, Petronas, TotalEnergies SE and Qatar Energy.
($1 = 5.68 reais)
(Reporting by Gram Slattery and Marta Nogueira in Rio de Janeiro and Sabrina Valle in Houston; Editing by David Gregorio)
