Brazil to Sell Oil Blocks Following Long Hiatus
This month, Brazil is set to auction off its rights over more than 280 oil production and exploration blocks. About 64 foreign and domestic firms are poised to compete and pour new oil investments into the country.
Five years ago, huge oil finds running to a hefty hundred billion barrels were discovered in the country’s Lula field. This was heralded as one of the largest finds in years; unfortunately, Brazil’s apparent oil success failed to follow through. As different groups fought for their share of the newfound oil wealth, auctions had been suspended for a time, leaving investors with no new oil blocks to explore.
Oil companies like BG Group and Chevron found themselves cutting down their budgets for oil exploration and production in Brazil as there were no blocks available to invest in.
A top official from Brazil’s infrastructure institute recently said that this month’s auction presents an opportunity for Brazil to regain investor confidence in the country. He noted, however, that the country may need years before it could successfully do so.
Nonetheless, its administration estimates that oil assets for auction will fetch dollar sales of up to 472 billion.
Some of the named bidders are Chevron, CNOOC Limited, Exxon Mobil, Petrobas, Repsol SA, Royal Dutch Shell, and Statoil.
Brazilian geologist Hernani Chaves disclosed that blocks located in Foz de Amazonas and those in the Ceara and Parnaiba basins might get the most bids. On the other hand, he noted that some blocks may not be as promising, and might even fail to draw interest among bidders.
Exploration in the Foz de Amazonas can be technically and physically challenging, yet investors are looking forward to invest in oil blocks within this zone. Explorers prefer oil blocks that are nearby fields already proven to hold significant oil volumes.
This is particularly true of Foz de Amazonas, which is situated far off Brazil’s northern shores. Geology experts say that explorers may strike oil deposits here that could resemble those found in Ghana and Nigeria.