Brazil's Supreme Court Overturns Injunction, Round 8 to be Held in H2

Brazil's hydrocarbons regulator ANP will conclude its eighth hydrocarbons exploration licensing round in the second half of 2007, most probably in September, ANP general director Haroldo Lima told reporters in Rio de Janeiro.

The decision comes after Brazil's supreme court (STF) overturned an injunction, which had previously blocked the eighth round from proceeding.

"We had just heard the news that the supreme court had overturned the injunction. We do not want to get ahead of ourselves but as soon as minor issues are cleared, we will start deliberating over round eight," Lima said.

Nationalist groups in November 2006 were granted an injunction by a regional court on claims that limits to bidding affected federal energy company Petrobras' (NYSE: PBR) activities and hurt national interests.

"We still need the supreme court to overturn one more injunction from a court from Rio de Janeiro. Our lawyers are already in contact with the Rio court to notify them the supreme court has overturned a similar injunction. In 10 days, the way could be clear to restart round eight," Lima said.

The eighth round will probably take place before the ninth round, which is scheduled for November 27-28, ANP director Nelson Narciso told journalists.

"But first we will have to make sure the oil and gas players have time to get organized and make their own plans for the bidding round," Lima said.

"We studied what went wrong with round eight and we made a contingency plan to avoid similar problems for the next rounds," Narciso said.

In the eighth round, 23 companies won 38 blocks before the injunction suspended the auction.

The injunction "was an obstacle for the Brazilian government to pursue public policies to support the development and growth of Brazil's economy as its energy production is based on oil and natural gas," the supreme court said.

The suspension of round eight put national security at risk, STF said.

"Blocking the auctions for oil and gas E&P hampers the constant need for recovery of Brazil's reserves, which are the outcome of a long-term process that can exceed 10 years from the bidding process to the production start if oil is discovered," the supreme court said.

ANP soon will hold a roashow to the regions where blocks in round eight and nine are located. The strategy is to explain to lawmakers and mayors the advantages to each city involved in the process, Narciso said.

Asked whether two bidding rounds in a short period of time would create an oversupply of oil and gas companies interested in investing in Brazil, Narciso said both rounds will be successful.

"The companies who were firstly interested in round eight areas may still be interested. We need to invite them again. I am positive the companies will be interested in the round eight blocks because these blocks are very good," Narciso said.

"ANP also believes Brazil has a unique advantage for oil and gas players, considering Brazil's political and economic stability, the market for oil and gas produced in the country and its oil and gas services industries," Narciso said.


Brazil's oil association IBP applauded the supreme court's decision.

"We think this was a historic decision as justice prevailed. The oil industry feels very encouraged by the ruling because it shows the strategic importance of auctioning new blocks and preserving Brazil's self-sufficiency in oil," IBP executive secretary Alvaro Teixeira told BNamericas.

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