Brazil Oil Rights Auction Seen Having Little FX Impact

Reuters

RIO DE JANEIRO/SAO PAULO, Oct 21 (Reuters) - The Brazilian real will likely receive a limited boost from the government sale of oil rights on Monday, as auction winners will bring fewer dollars than expected into the country to pay for a cash signing bonus of 15 billion reais ($6.88 billion).

So far, only France's Total SA has said it will bring the equivalent of 3 billion reais to pay for its share of the bonus, which is an up-front cash payment the government demands for rights to develop the giant Libra oil field off the coast of Rio de Janeiro.

The bonus payment is expected within a month, said Magda Chambriard, the head of oil regulator ANP.

The winning consortium is led by Brazil's Petroleo Brasileiro SA and includes foreign companies Anglo-Dutch Royal Dutch Shell Plc, China National Petroleum Corp and China's CNOOC Ltd.

Total and Royal Dutch Shell will each have 20 percent of the consortium, while each of the Chinese companies will have 10 percent.

"As a large share of the consortium is Brazilian, the impact on the exchange rate will be smaller," said Reginaldo Siaca, a manager at the currency desk of Advanced brokerage in Sao Paulo.

Shell said it will use money from its Brazilian operations to pay for its share of the bonus, which is also worth 3 billion reais. The Chinese companies, which need to pay 1.5 billion reais each, have not yet said where the money is coming from.

Brazil's state-run oil company, also known as Petrobras, has enough cash to pay for the 6 billion reais corresponding to its 40 percent share of the consortium, Finance Minister Guido Mantega told journalists in Sao Paulo.

He added that the expected dollar inflows "are not a concern" for the foreign exchange market.

The Brazilian real ended at 2.1812 per dollar on Monday, 0.3 percent weaker than Friday's close.

Copyright 2016 Thomson Reuters. Click for Restrictions.

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