Pre-Salt Operatorship Hinges on Brazil Presidential Elections
The five-year gap in bidding rounds – with Brazil Round 10 taking place in December 2008 and Round 11 in May 2013 – was bad for the oil and gas industry in Brazil, a fact that leftists and other political parties in Brazil recognize, said Chequer. Like previous president Lula – whose leftist politics raised concerns that the Brazilian government wouldn’t honor contracts, but who was smart enough to know that Brazil needed foreign investment – Brazilian’s current political officials also know that things need to change to advance development of its pre-salt resources, which could boost Brazil’s estimated reserve base from 10 to 50 billion barrels.
The Brazilian government also realizes it made a mistake requiring Petrobras to be the sole operator of pre-salt development, which has delayed development of Brazil’s oil and gas industry. Chequer said the Brazilian government didn’t believe the capacity exists in the global market to offer more than one area of the pre-salt for bidding due to the huge investment needed. But more could be offered in the future if existing pre-salt bidding laws didn’t require Petrobras to be the operator.
Despite the government’s decision in 2009 to halt bidding rounds while it created a new bidding model for the pre-salt, Brazil’s oil and gas industry still saw plenty of farm-in and farm-out activity, rising from 30 transactions in 2009 to over 40 in 2010 and around 70 in 2011 and 2012. Chequer attributed the decline in these transactions to 20 in 2013 to the focus of oil and gas companies on last year’s bidding round.
Last year, three bidding rounds were held, including one for Libra, another for onshore assets and one for offshore blocks. The most recent round saw 289 onshore and offshore blocks offered and 142 blocks awarded. Bidding activity for the onshore and offshore blocks outside the pre-salt were focused on the Equatorial Margin in Brazil, Chequer said. Bidding Round 11 attracted 12 Brazilian national companies and 18 foreign companies, including the majors, and raised $4.3 billion, including $1.3 billion worth of signing bonuses and $3.1 billion in minimum exploration program investment.
By comparison, 130 onshore blocks and 54 offshore blocks were awarded in Round 10, which attracted 11 national and six foreign companies, primarily small and medium-sized companies. Round 10 raised $316.4 million in investment, including $276.2 million in signing bonuses and $40.4 million in minimum exploration investment, Chequer noted.
The roster of exploration and production companies currently working in Brazil include Exxon Mobil Corp., Chevron Corp., BP plc, Shell, INPEX Corporation, Anadarko Petroleum Corp., Statoil ASA, Maersk and Karoon Gas Australia Ltd.
Significant investment will be needed in Brazil to fully develop its oil and gas resources. An estimated $400 billion will be needed for equipment and services until 2020. Currently 48 floating production storage and offloading (FPSO) vessels, 57 drilling rigs, and 55 oil tankers are operating in Brazil, Chequer said, adding that 68 more FPSOs, 65 more drilling rigs and 65 more oil tankers will be needed in Brazil.
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