Brazil's First Oil Auction in Five Years Draws Record Bids

RIO DE JANEIRO - Brazil saw record bidding at its first oil auction in five years Tuesday as the growing promise of oil finds along the equator attracted huge interest in exploration blocks at the mouth of the Amazon River.

Large oil finds in the Gulf of Guinea off the coast of Africa, along with promising finds in French Guyana on the South American continent, have shifted attention to Brazil. The South American country suspended its annual oil auctions in 2008 after the discovery of the subsalt oil province--close to 40 billion barrels of oil equivalent trapped under a layer of salt several thousand meters below the South Atlantic seabed.

Interest in that so-called equatorial margin "created more appetite for companies to invest," said Magda Chambriard, head of Brazil's national petroleum agency, ANP. "Those areas have become more important" to the global oil industry, which was reflected in the heavy bidding for the blocks, she said Tuesday.

A group led by France's Total SA--and that includes BP PLC and Brazil's state-run oil Petroleo Brasileiro SA--agreed to pay 345.95 million Brazilian reais ($172 million) for rights to explore an area of about 900 square kilometers at the mouth of the Amazon, topping a previous record set in 2006 for an oil field off Brazil's southeastern coast.

Ms. Chambriard said she sees the possibility of several platforms in the region producing 120,000 to 150,000 barrels of oil a day, similar to what is already happening in the Jubilee oil field off the African coast.

At the end of the auction, Brazil's government had raised BRL2.88 billion from selling exploration rights, topping the record BRL2.1 billion raised during a 2007 auction.

The record bids suggest that companies weren't scared off by requirements imposed by Brazil's government that a portion of exploration equipment be manufactured locally. However, bids Tuesday hewed relatively close to the minimum local-content level, showing that firms are being "more cautious," even as they acknowledge that the local-content requirement is "here to stay," Ms. Chambriard said.


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