Brazil Plans New Oil-Rights Auction in the 2nd half of 2015

Source: Reuters 3/3/2015, Location: South America

Brazil plans to hold its 13th round auction of oil and natural gas exploration and production rights in the second half of 2015, Mines and Energy Minister Eduardo Braga said.

The government had planned to hold the auction in early May, but pushed the date back at the recommendation of the ANP, the oil regulator that handles the auctions.

The ANP blamed the delay on recent declines in oil prices as well as financial difficulties faced by state-run oil company Petroleo Brasileiro SA, or Petrobras, which is responsible for 84 percent of Brazilian oil output.

"People hope that Petrobras takes part, but this is not an auction that it is required to take part in, as in the subsalt areas," Braga told reporters in Brasilia.

The auction will be for rights to explore and produce oil in areas outside the country's so-called Subsalt Polygon. In exchange for the rights, companies must pay the government a royalty on each barrel produced and comply with a minimum investment and development plan.

The polygon is home to giant oil resources trapped deep beneath the seabed by a layer of salt. All new development in the polygon must have a minimum 30 percent share for Petrobras, and companies that win rights to an area must give the Brazilian government a share of the oil to sell on its own.

When combined with non-subsalt Campos Basin fields already operating in the polygon, the area is responsible for more than 80 percent of Brazil's output and most of its major recent discoveries.

The 13th round auction will focus on less-prolific offshore and onshore areas. As soon as the government decides when the auction will take place, the ANP will need about four months to organize it.

"I believe we can, during March, decide what areas will be selected for study so that we can hold the auction in the second half," Braga told reporters in Brasilia.

He also said that while the country's hydroelectric-generation scenario has improved with recent rains, the situation, where some expect a drought to prompt power rationing, still requires caution.


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