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BRAZIL: Oil Areas Auction Set To Draw Bids From Exxon, Petronas And Gazprom

07/07/2017 | 15h04

The increasing output and high productivity level of Brazil’s pre-salt area oil blocks should help the government to lure investments from foreign companies in the next oil auctions scheduled to October. US’ ExxonMobil, Malaysia’s Petronas and Russia’s Rosneft and Gazprom are expected to show up and bid for blocks under a production sharing regime, according to analysts.

Exxon, the world’s largest publicly-traded oil company, has few oil operations in Brazil, focusing on chemical and polymers production and two onshore gas blocks in Sergipe and Cear?. The Brazilian government, which visited the company’s headquarters in the United States three times this year, expects this to change. “We had close contact with the company and the interest in the country is great,” said M?rcio F?lix, Secretary of Oil and Gas of the Ministry of Mines and Energy.

Exxon’s interest is to actively participate in oil exploration in the pre-salt area, after studies showed that the reserves in the layer could reach up to 100 billion barrels of recoverable oil, placing Brazil alongside significant world producers like Iraq, the United States, and Saudi Arabia. The company is rumored to try a partnership with France’s Total and Norway’s Statoil to jointly explore pre-salt areas with Petrobras.

President Michel Temer’s recent visit to Russia may also result in opportunities for exploration and production investments in Brazil. Gazprom and Lukoil’s executives and the Russian President Vladimir Putin met with representatives of the Brazilian government in the Kremlin for hours to analyze pre-salt data. Output in Brazil’s pre-salt layer reached 1.57 million barrels of oil equivalent per day (boed) in May.

Another Russian oil company, Rosneft, which explores gas and oil in blocks located in the Solim?es Basin, in the northern Brazilian state of Amazonas, is also a strong candidate to participate in the oil areas auction on October 27.

“It’s likely that Rosneft will also play in the 14th round in September,”Felix said.

In an interview with the CMA Agency, Brazil’s Oil and Gas Secretary stated that Petronas is also studying areas to invest. “During the roadshow, we go through new countries to seek investors, and the Malaysian oil company, which is not very active in Brazil, may have opportunities in these tenders.” In 2015, there was a Petronas partnership with OGX in the Tubar?o Martelo field, but the alliance was broken after a few months.

New developments can also arise from Chinese companies, especially Sinopec, which operates in Brazilian territory through Galp Energia.

“The expectation is that the Chinese will have a bigger position in the oil and gas industry. This will undoubtedly happen through more partnerships with Petrobras, which dominates ultra-deepwater exploration,” said Anderson Dutra, a partner in the KPMG Oil & Gas area in Brazil. Yesterday, Petrobras and China’s CNPC, which is part of the Libra consortium, signed an alliance agreement in Brazil and abroad.

According to Petrobras, this deal is significant to fulfill its business and management plan for the 2017-2021 period and to reach its divesting goals by the end of next year.

There are rumors that CNPC will take over the works in the Rio de Janeiro Petrochemical Complex (Comperj) construction, halted since 2015, with the purchase of a minority stake in the project. The refinery unit will produce naphtha, diesel oil, aviation kerosene and cooking gas. Another Chinese state-owned company that can expand its presence is CNOOC.

Brazil’s secretary of the Ministry of Mines and Energy also said that Chinese investors, including investment funds, are very interested in the pre-salt production-sharing regime, but want to understand better the political crisis in Brazil, centered on President Michel Temer, who was formally charged with corruption last week.

For Dutra, from KPMG, one of the surprises in these bidding rounds may be Saudi Arabia’s state-owned Saudi Aramco. The oil company is preparing for an initial public offering since 2016. “Their interest is to expand international performance, and Brazilian reserves can be strategic.” Qatar Petroleum, which paid US$ 1 billion to Shell for a 23% stake in the Parque das Conchas project in the Campos Basin is another candidate.

The renewal of Repetro, a tax exemption program for imported equipment used on oil exploration projects in Brazil, is considered an essential condition for the October oil auctions to succeed. Direct investments from these areas could reach US$ 83 billion, according to ANP estimates.

The Brazilian government also granted a few other perks for foreign investors, like reducing the need to use local equipment and services to explore oil areas and ending Petrobras’ exclusivity to operate oil fields in the pre-salt layer.

The good results from the pre-salt exploration can also increase the appetite of established competitors in Brazil such as the Anglo-Dutch Shell, the British BP, the US Chevron and Norwegian Statoil.

The material has been provided by InstaForex Company –

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