Meagre discoveries may inhibit interest in Brazil oil round

Mar 21, 2002 01:00 AM

A lack of significant discoveries may inhibit interest in Brazil's fourth round of tenders for oil exploration and production licenses, scheduled for June, said the director of the country's oil regulator. "The fact that we haven't had a big discovery since 1996 is not a positive factor," said Sebastiao do Rego Barros, ANP's director, at a press conference. "If there were a big find between now and June, interest from companies would double."
ANP plans to sell licenses to explore 54 offshore and onshore blocks located in traditional offshore areas such as the Campos, Santos and Espirito Santos basins, but also in "frontier" onshore fields in Sao Luis, Sao Francisco and Parnaiba in North-eastern Brazil.

Barros said that so far 27 companies have bought the information package for the round, the fourth in as many years, as Brazil continues to open up its oil and gas sector for competition. Last year, 38 companies signed up. The application period for this year's round ends in May.
"We received several requests from companies interested in exploring fields that had never been offered before, especially unexplored inland areas," Barros said, explaining that ANP is offering "very attractive" conditions for the winners of such blocks.
"The rental fees will be the cheapest ever charged by ANP because these areas carry higher risk, and there isn't a whole lot of data available about them," explained Ivan Simoes Filho, General Manager of Licensing Rounds for ANP. Simoes Filho said seven newcomers have demonstrated a firm interest in bidding for the licenses. One of them is Brazil's Starfish Oil & Gas, which bid in a consortium with oil giant Petroleo Brasileiro, or Petrobras, in the first E&P round, and decided to go it alone this year.

"Now we want to participate as a single bidder, and we are mostly interested in the new onshore fields," CEO Wagner Freire said. Market analysts say more first-timers might get in on the action until June, setting the stage for a successful round despite the low discovery rates and lower oil prices on the international market.
"From what I've been hearing there are several new players interested in bidding this time around, which is a good sign," said Itau Securities oil analyst Gilberto Pereira, adding the low rate of discovery is one of the risks of the business. "It's hard to say how long is too long when looking for oil, especially because companies have to go through a very bureaucratic process before they can start drilling," Pereira added.
Companies looking for oil in Brazil have complained about delays in obtaining environmental licenses to start their prospecting activities, as well as high taxes and royalties.

Looking to lure new players and offset bureaucratic hurdles and elusive discoveries, the government will offer about 1.0 bn reals in funding for geological research and seismic prospecting -- activities that were carried out by Petrobras in the past. The federally-owned oil group held the monopoly of all upstream and most downstreamoperations until 1998, when the sector was opened up to other players to look for oil in Brazil's potentially rich fields. However, the oil giant remains Brazil's only producer.
ANP said the funds aim at seeking new frontiers which Petrobras hasn't yet explored. Barros said the funds will also serve to define which blocks will be offered in the future and to better demonstrate Brazil's production potential.
The low discovery rate had already been cited last year ahead of the auctions as a factor for potential lukewarm interest. It's difficult to know the success rate of an oil block before exploration, and companies usually rely on geological data provided by government agencies such as Brazil's ANP to determine whether they should bid.

Once they have won the block, it's necessary to invest at least $ 15 mm per well in the search for oil or gas in the deep-water basin, analysts note. Often, companies have to drill two or three wells before they can determine whether the block is commercially viable. Nevertheless, interest proved firm during the past rounds, which attracted major world players such as ExxonMobil, El Paso, Repsol-YPF and Amerada Hess.
Last year Brazil sold 34 out of 53 concessions for oil exploration blocks on offer, garnering BRR 594.9 mm in licensing fees, surpassing tallies from the 1999 and 2000 auctions. In the first such auction, in June 1999, ANP offered 27 concession areas, but only managed to sell 12 of them. Still, the landmark 1999 auction was hailed as a success not only for the BRR 322 mm the government raked in, but also because it marked the end of the four-decade monopoly of Petrobras in oil exploration.

In 2000, ANP sold 21 out of 23 blocks for BRR 468.25 mm. After nearly half a century dominating the oil sector, Petrobras started relinquishing its monopoly in 1997 when it returned some of the exploration areas under its control to the ANP. The Brazilian government held its first round of auctions in 1999.

Source: Dow Jones
Alexander's Commentary

Change of face - change of phase

In the period of July 20 till August 3, 2015, Alexander will be out of the office and the site will not or only irreg

read more ...
« April 2020 »
April
MoTuWeThFrSaSu
1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30

Register to announce Your Event

View All Events