Brazil ANP Lauds 10th Round E&P Auction As 'Great Success'

RIO DE JANEIRO (Dow Jones Newswires), Dec. 18, 2008

Officials from Brazil's National Petroleum Agency, or ANP, called its 10th round auction of oil and natural gas exploration and production blocks Thursday a "great success," despite the absence of several foreign oil heavyweights.

"The 10th round was a victory," ANP President Haroldo Lima said after the auction, which had been scheduled to take place Thursday and Friday. Bidding was so efficient that the auction was completed in a matter of hours.

The ANP sold 54 of the 130 E&P blocks in eight sedimentary basins. Some 17 oil companies - 11 Brazilian and six foreign - paid 89.4 million Brazilian reals ($38 million) for the rights to explore the blocks. Total investments for initial exploration of the blocks were pegged at BRL611 million.

Premiums for the blocks were expected to range between BRL61,000 Brazilian reals and BRL480,000, generating total revenue of at least BRL240 million.

The auction included four basins considered mature areas and four new frontiers - the Amazonas, Parana, Parecis and Sao Francisco basins. The ANP wanted to include the lesser-known areas that had been left out of previous auctions, ANP directors said.

"We were concerned that some of the basins were being left out of the exploration process," said ANP board member Magda Chambriard.

Chambriard noted that previous areas considered "new frontiers," such as the subsalt region of the Santos Basin, were now thought of as high-potential areas.

ANP board member Nelson Narciso called the auction a "great success" on all levels. While 76 E&P blocks did not receive a bid, 41.5% of the blocks offered did get bids - the largest total percentage of the 10 auctions held by the ANP, Narciso said.

The average percentage of blocks receiving bids in previous auctions was about 20%, Narciso said.

"This round was the first that didn't have as an objective the idea of reaching self-sufficiency in oil production or diminishing crude oil imports," Narciso noted. "The idea was to boost oil exploration in the interior of the country."

The auction did, however, lack for star power from oil company heavyweights. The ANP said that 48 foreign and Brazilian oil companies were approved to bid at the auction, including such majors as Anadarko Petroleum, Devon Energy, Hess and BP PLC. Most stayed on the sidelines, including local player OGX Petroleo e Gas Participacoes SA -- the darling of last year's ninth-round auction.

Brazilian state-run energy giant Petroleo Brasileiro, or Petrobras, snapped up a majority of the early E&P blocks. Petrobras took 100% stakes in 17 blocks while also winning rights to eight blocks in partnerships with Galp Energia and two blocks with Partex Brasil.

Shell paid BRL11.6 million in winning bids for five blocks in the Sao Francisco basin in Minas Gerais state.

Brazil's government faced some criticism ahead of the 10th-round concession auction because no offshore blocks in the promising subsalt region were included. The offshore blocks were removed from concession auctions until the country's new regulatory model is confirmed.

ANP directors said that they didn't see any lack of interest in Thursday's auction, despite the absence of offshore blocks and the ongoing global financial crisis.

"I don't see any type of movement or diminished interest in exploration in Brazil," said ANP board member Victor Martins.

Copyright (c) 2008 Dow Jones & Company, Inc.

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