OTC: Brazil’s 13th bid round will be concession model, energy minister says

Brazil will use a concession model rather than a production-sharing model in the country’s 13th bid round later this year. The 269 blocks to be auctioned in the fourth quarter are outside of the presalt area and can be explored by any operator without a Brazilian partner, said Eduardo Braga, Brazil’s minister of mining and energy.

Braga made the announcement May 5 at the Offshore Technology Conference in Houston. Additional details of the auction are available from Brazil’s National Agency of Petroleum, Natural Gas, and Biofuels (ANP).

Brazil will continue to use a production-sharing model in its presalt blocks. Legislation has been proposed in the Brazilian congress to open the presalt to a concession model. Braga believes that this would be an unwise move for Brazil.

“Much of the revenue collected from presalt production-sharing goes to a health and education fund, the bill for which I oversaw as it made its way through congress,” said Braga. “This fund provides for the future of Brazilians while also supporting macroeconomic development in the country. It would be shortsighted to essentially defund this important program, and I think the majority in congress agree.”

Presalt blocks by 2017?

While presalt blocks are not up for bid in this round, Braga believes that some blocks will be in the next round, no later than 2 years after October bidding. He added, however, that Petroleo Brasiliero SA (Petrobras) will retain the right of first refusal in that bidding process. The minister voiced his government’s support for the embattled national oil company in remarks at OTC on May 4.

“We must give Petrobras the opportunity,” said Braga. “But if they can or will not take that opportunity, we will not slow development. We will give foreign operators the chance.”

Proven production

Braga noted that those opportunities in Brazil remain lucrative. He said 36% of all oil discovered in the world in the last 5 years (22.9 billion bbl) was discovered in Brazil. In the same period, 63% of all deepwater discoveries (22.2 billion bbl) have been in Brazilian waters.

“Brazil has 2.8 million sq km for potential exploration, of which much has already been proved,” said Braga. “Companies currently operating in the sector have 430 fields under production. Additionally, there are no restrictions on the export of oil from Brazil, with over 500,000 b/d exported in 2014 by 17 companies.”

Petrobras accounted for only 45% of such exports, with the remaining 55% coming from other companies operating in the country.

Braga expects heavy participation in the 2015 auction and says he has heard as much from operators at OTC. Continued low oil prices do not seem to putting a damper on enthusiasm for investment off Brazil.

“Large multinational companies don’t make long-term decisions based on temporary price fluctuations,” he said. “They are thinking 10-15 years out and have a need to replace reserves. We want to engage these companies and create an economic environment that convinces them to invest in Brazil.”

Contact Michael T. Slocum at michaels@ogjonline.com.

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