Seven extremely positive facts of the 4th round pre-salt auction/opinion

 

June 7, 2018

The 4th. round in the sharing regime held today by the ANP was a success, a great success. Even though it did not attract interest in one of the four blocks, the awarding of three blocks to three different consortia of six different major oil companies should be considered as a strong positive signal for the domestic industry.

Eleven companies grouped in four consortia voraciously disputed the Uirapuru block, located in the Santos Basin. For the first time in the history of sharing bids, Petrobras (and its partners) was defeated by a competing consortium. The consortium led by Equinor (formerly Statoil) and ExxonMobil offered 75.49% of the Union’s Oil-Profit rate, while the others also had high offerings 68.5% -72.49%. The location of Uirapuru lies immediately north of Carcará and Carcará Norte, where Equinor and ExxonMobil are the concessionaires. It will not be surprising if the future exploration indicates that these three locations are part of a single and continuous gigantic mega-structure, rivaling the fields of Lula and Búzios. This is evidenced by the spectacularly high offer from the winning consortium. Petrobras asserted its position as a preferred participant in the sharing regime, granted by the current legislation, and decided to confirm its participation in the winning consortium.

Five companies grouped in two consortiums disputed Block Três Marias, also in the Santos Basin. Here too, the consortium led by Petrobras was defeated by an offer of 49.95% of the Union’s Oil-Profit rate, offered by the Shell / Chevron consortium. Once again, Petrobras decided to participate in the winning consortium.

In Block Dois Irmãos, the Petrobras / Equinor / BP consortium submitted an isolated offer at the minimum rate and won the block without competition. Block Itaimbezinho, as expected by experts, did not receive any offers. During the press conference, the Director General of the ANP clarified that the placement of this block was due to the nomination of one of the companies registered in the contest, but even this company did not submit an offer. Both blocks are located in the Campos Basin.

The extremely positive facts of this round were:

(1) The participation of 11 of the 16 companies registered in the round, through the formation of 7 different consortia.

(2) The end of the myth that Petrobras would be unbeatable once exercised its preemptive right to certain blocks.

(3) Confirmation of the positioning of the majors Equinor, ExxonMobil, Shell, BP, Total and Chevron as firm and permanent investors in the Brazilian oil industry. They are here to stay and for a long time.

(4) The solo flight of the two Chinese companies in the Uirapuru Block dispute.

(5) The premium obtained in 2 of the 4 blocks (500.36% and 240.35%).

(6) Expected investments of R $ 738 million.

(7) The accumulated bonus of R $ 3.15 billion; with the specific promise made by MME Secretary of Petroleum and Natural Gas, João Vicente de Carvalho, that this money would not be used in the subsidy of diesel oil.

It is also evident that this is an excellent deal for companies that do not enjoy the privilege of participating in a consortium led by Petrobras, in the dispute of a block in which their preemptive right was exercised, trying to compete and defeat Petrobras. First, because they guarantee the operation of the block by the world’s best pre-salt operator, Petrobras. Second, Petrobras enters a minority, with only 30%, and the other participants of the winning consortium have a majority stake. Therefore, in case of some internal dispute, the final decision will always be of the participants who dared to offer a higher rate to the Brazilian government.

From all possible points of view, this round, conceived and carried out by the ANP, was a great success.

Pedro Zalan is a geologist and consultant and has worked for 34 years at Petrobras.

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