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  HOME | Brazil (Click here for more)

Brazil to Allow International Companies to Bid for Huge Offshore Fields
Brazil will invite international oil companies to bid for concessions in enormous -- estimates of 80 billion barrels of high-quality crude -- but technically challenging, offshore fields beginning next year.

LONDON – Brazil will invite international oil companies to bid for concessions in enormous, but technically challenging, offshore fields beginning next year, Mines and Energy Minister Edison Lobao told the Financial Times.

The South American country had suspended the concessions in the so-called “pre-salt” area – so named because the estimated 80 billion barrels of high-quality crude in that new oil frontier lie far beneath the ocean floor under layers of rock and an unstable salt formation – shortly after it was discovered in 2007.

Since then, according to the financial daily, the Brazilian government has been drawing up new regulations for those recently discovered Atlantic fields, which pose an enormous technical and financial challenge due to the depth and thickness of the salt and the drastic changes in temperature as the oil is brought to the surface.

Lobao told the paper that Brazil cannot assume the Herculean task of developing the reserves on its own.

“We will certainly be holding auctions next year. This means the oil companies can begin to prepare their treasury reserves,” the minister said.

Oil-industry experts expressed surprise at the announcement, among them RoseAnne Franco, lead analyst for Latin America at PFC Energy in the United States.

“It would rest on the assumption that Brasília will be able to promulgate a new regulatory framework in the near term, but there are so many stakeholders vested in the development of these fields that the legislative debate may be more arduous than expected,” Franco told the Financial Times.

Brazil sold several concessions to pre-salt fields before that area’s potential was evident and the government has pledged not to modify those contracts.

Petrobras and its partners – ExxonMobil, BG, Galp, Repsol and Royal Dutch Shell – will have plenty of work over the coming years exploiting these huge deposits, the newspaper cited experts as saying.

Many oil industry analysts, according to the daily, had predicted that the government would be in no hurry to draw up new laws regulating the pre-salt fields, since it would be difficult to get controversial legislation passed before 2010, an election year.

Lobao told the Financial Times that he favors strict terms for new companies drilling in the pre-salt region and also advocates the creation of a new firm totally under the control of the Brazilian government to oversee them.

Nevertheless, he said Brazil must learn from the experiences of Venezuela and Mexico and not alienate international oil companies.

Due to Mexico’s strict financial terms and leftist Venezuela’s habit of forcing companies to renegotiate contracts, those countries are in danger of losing their positions as the region’s leading exporters, the Financial Times said.

Foreign governments from China to the United States and international oil companies are lining up to help Brazil exploit its vast deposits, even as they are shunning Mexico and Venezuela.

According to estimates by Brazil’s oil regulator, reserves in the pre-salt region could total as much as 80 billion barrels, or more than five times the country’s proven reserves of 14 billion barrels, and turn the South American giant into a major oil exporter.

Petrobras plans to invest close to $29 billion through 2013 to develop fields in the pre-salt region, with the goal of producing 219,000 bpd in that area by 2011.

The company then plans to increase output in the pre-salt to 1.3 million bpd by 2013 and 1.8 million bpd by 2020, roughly equivalent to Brazil’s daily output from all its domestic fields last summer.

Petrobras, an integrated energy company and the global leader in deepwater oil exploration and production, operates in 27 countries in the Americas, Africa, Asia and Europe.

Shares of Petrobras, Brazil’s largest corporation, trade on the Sao Paulo, New York, Madrid and Buenos Aires stock exchanges, but the Brazilian government retains control through a golden share. EFE

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