Officials expect new oil auctions to attract up to R$83bn by 2019Valor International
The National Agency of Petroleum, Natural Gas and Biofuels (ANP) expects the ten auctions planned for 2017, 2018 and 2019 to result in direct investments of $83 billion. The agency’s director-general, Décio Oddone, says the calculations take into account the success chances of exploration efforts. Estimating how much the government can raise with the auctions is still impossible, but only the four tenders planned for 2017 could generate $8.5 billion, according to the Ministry of Mines and Energy (MME).
he agency believes the areas may hold 10 billion barrels of recoverable petroleum, as Valor PRO first reported on Monday. If all that oil is indeed found, it will result in an increase of over 2 million barrels a day in Brazil’s output by 2027. Brazil ended 2016 with proven reserves of 12.7 billion barrels of oil, and of 378 billion cubic meters of gas. The calculations don’t include the output of already auctioned fields in pre-production stage, like Libra.
After winning the auctions, exploration companies will need to confirm those volumes. ANP estimates they will need to drill 300 exploration wells, demanding the simultaneous operation of over 20 drillships. It would help revive a segment badly hurt by the slowdown at Petrobras and the low share of private-sector companies in the sector, after five years without auctions. All of that oil also will need an additional 17 new rigs to leave the ground.
ANP issued the $83 billion investment estimate based on those forecasts. Mr. Oddone says the areas Brazil will offer are among the most attractive in the world and should generate an even bigger number of indirect investments by the whole production chain.
“Those investment calculations don’t take into account indirect investments. Statistics show the chain invests more than two times and a half what companies spend directly,” Mr. Oddone said in Houston, where he participates in the Offshore Technology Conference (OTC).
This means that, if successful, the $83 billion would result in $166 billion to $207.5 billion in indirect investments by service providers. ANP also prepares changes for contracts and rules of the 14th Bidding Round, scheduled for this year, which will offer 287 offshore and onshore blocks.
Officials want to lower entry costs for companies and simplify contracts, Mr. Oddone says. The agency intends to remove the requirement of local content as offer criterion and reduce to 5% from 10% the royalties for frontier and mature areas with low geologic, logistic and economic risks. Mr. Oddone says the goal is to make the investment in exploration and production in those areas more attractive, encouraging funds to participate indirectly.
Another change is the introduction of a single exploration phase, freeing companies from the obligation of drilling wells in a second phase. Companies currently sign up to drill at least one well, regardless of the seismic survey’s initial results. The changes will be submitted to public hearings.
Brazilian officials already authorized four auctions this year. The first, the 4th Round of Areas with Marginal Accumulations, will target smaller companies. Then there will be the 2nd Round of Production-Sharing Areas with unitizable fields in the pre-salt layer. The third is the 14th Bidding Round, already with changes, followed by the 3rd Bidding Round under the production-sharing regime. The last one will offer the Paul Brasil, Peroba, Alto de Cabo Frio-Oeste and Alto de Cabo Frio-Central prospect, located in the pre-salt polygon of the Campos and Santos basins. The National Council of Energy Policy set the signing bonuses for the four areas of the 4th Round at R$4.4 billion.