Oil majors vie for eleven areas in coveted auction in Brazil

Nine oil companies, including the multinationals BP Energy, Chevron, Shell and Total Energies, will compete this Friday in an auction for the rights to exploit eleven areas in the gigantic pre-salt reserves, located in very deep waters of the Atlantic off the Brazilian coast.

Norway's Equinor, Malaysia's Petronas, Colombia's Ecopetrol and Qatar's Qatar Energy will also participate in the tender, in which Brazil's Petrobras will also be bidding, according to data released by the National Oil and Gas Agency (ANP, the regulator).

If all the blocks offered are auctioned off, the Brazilian state will collect 1.28 billion reais (about $242 million) just for the right to participate.

The so-called Permanent Production Sharing Offer, whereby licences are offered to explore and exploit fields in partnership with the Brazilian state, is the first of its kind in pre-salt blocks.

Unlike traditional concession auctions, in which Brazil offers the highest bidder rights to explore and exploit an area, the Production Sharing auction is awarded to the company that offers the Brazilian state the highest percentage of participation in its production.

The nine companies were approved by the ANP's Superintendence for the Promotion of Bids and by the Special Bidding Commission (CEL) of the regulatory body, so they are qualified to present their proposals to the ANP for the areas they are interested in exploiting in partnership with the State.

This tender offers rights to explore and exploit hydrocarbons in eleven different blocks in the Santos and Campos basins, off the coast of the Brazilian states of Sao Paulo and Rio de Janeiro, respectively, with proven reserves in the pre-salt.

These are four blocks in the Campos basin (Água Marinha, Norte de Brava, Itaimbezinho and Turmalina) and another seven in the Santos basin (Ágata, Bumerangue, Cruzeiro do Sul, Esmeralda, Jade, Sudoeste de Sagitário and Tupinambá).

Petrobras, having discovered the pre-salt horizon, has pre-emptive rights in the areas auctioned under the sharing regime, which it has already announced it will exercise over the Água Marinha and Norte de Brava blocks, with a minimum participation of 30 %.

This means that if the participating companies have an interest in either of these two areas, they will have to include the state-owned company in the consortium if they win.

The Água Marinha and Turmalina (Campos basin) and Ágata, Esmeralda, Jade and Tupinambá (Santos basin) areas were to be offered in future auctions, but it was decided to bring forward their bidding by including them in the permanent offer. The other blocks did not receive bids in previous tenders.

The gigantic reserves of the pre-salt, a geological horizon located below a two-kilometre-thick layer of salt that began to be exploited less than two decades ago, could make Brazil the world's fifth largest hydrocarbon supplier.