Petrobras Will Be 'Selective, Focused' in Oil Concession Auction

Petrobras Will Be 'Selective, Focused' in Oil Concession Auction

RIO DE JANEIRO - Brazilian state-run energy giant Petroleo Brasileiro SA, or Petrobras, is in talks with the world's largest oil companies about forming partnerships to bid for new oil and natural-gas exploration concessions at a much-anticipated auction set for next month, Chief Executive Maria das Gracas Foster said in an interview.

"Our participation in the auctions this year is going to be focused and selective," Ms. Foster said. "We are making it a priority to work in partnership with big oil companies."

Brazil will auction off 289 oil and natural-gas exploration blocks on May 14-15, the country's first such auction of new exploration acreage since 2008. This auction doesn't include blocks from the subsalt area, as these will be sold later this year at an auction that will be under new legislation passed in the wake of the discovery.

Potential tie-ups with big oil companies for the round of blocks in May would help to reduce costs for Petrobras as the company embarks on a $237 billion investment plan through 2017, one of the world's largest corporate-spending campaigns, as well as ease the company's workload as it moves quickly to boost flagging crude-oil output by bringing the massive new subsalt fields into production.

While partnerships would help to diminish the company's financial risk in the new exploration areas, they would also provide a sounding board to discuss the best way to develop any potential discoveries, Ms. Foster said in an interview this week.

After primarily playing the lead role in Brazil's offshore oil industry for more than 30 years, Petrobras also appears ready to let potential partners take the reins for awhile. "We are negotiating to not be the operator" in new exploration blocks, Ms. Foster said.

Because Petrobras already serves as the operator in many of its oil fields and exploration blocks, Ms. Foster said that "we are discussing the partner's interest in being the operator. We're not going to fight about that."

But with whichever companies Petrobras forms partnerships for this year's planned auctions, they will be major players, Ms. Foster emphasized. The companies will have know-how and be strong financially, Ms. Foster said.

On Thursday, Royal Dutch Shell PLC Chief Executive Peter Voser noted that his company has "a very successful partnership" with Petrobras and is interested in further collaboration. The oil major will study the bid areas but hasn't yet decided whether it will participated in the May auction, he said.

Separately, Ms. Foster said Petrobras isn't considering taking an active role in developing infrastructure projects with billionaire Brazilian businessman Eike Batista's EBX Group of companies. EBX holds interests in such diverse areas as mining, real estate, shipbuilding, oil production and ports.

"Petrobras is not going to participate in the construction of any shipyard," Ms. Foster said. "Petrobras doesn't know anything about shipyards, Petrobras wants to use shipyards."

Mr. Batista's shipbuilding company, OSX Brasil, was part of a consortium that won a tender to provide processing modules for two floating-production platforms, Ms. Foster noted.

Brazil is especially keen to see the Acu port currently under construction by Mr. Batista's LLX Logistica completed, according to a person close to the government. Since September, Petrobras has held talks with EBX Group about buying services from the group, but won't go beyond that, Ms. Foster said.

"What we are seeking with this group are contracts to use the infrastructure it's building," Ms. Foster said. "Because [LLX] is building the port, but hasn't completed construction yet, these contracts will only happen when the port is built and will have to be at the lowest cost."

Petrobras will hold a tender that will make sure any services are contracted at the lowest-possible price, Ms. Foster added. Talks with EBX Group will likely be "better defined" starting in June, but contracts are unlikely to be signed at that time, Ms. Foster said. "I don't have any dates set to sign contracts," the executive said.

Copyright (c) 2012 Dow Jones & Company, Inc.


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