Brazil sold production rights to develop the giant offshore Libra oil area to a consortium led by Brazilian state-run oil company Petroleo Brasileiro SA in an auction with a single bid on Monday. The auction in Rio do Janeiro took place amid strict security measures with hundreds of police forces clashing with protestors.
Petrobras took 40% of the field, 10 percentage points above the legal minimum. France's Total SA and Anglo-Dutch Royal Dutch Shell Plc will each have 20% while China National Petroleum Corp and China's CNOOC will each have 10%.
The companies will give 41.65% of their profit oil - or oil produced after initial investment costs are paid - to the Brazilian government under a new production-sharing contract. That minimum bid established by law was also 41.65%.
The companies will have to pay 15bn Real (approx 7bn dollars) signing fee for the 35-year project in deep waters of the Atlantic Ocean.
Libra is the first auction of subsea prospects known as pre-salt using a production-sharing model that makes Petrobras the operator of all new projects and requires it to own at least a 30% stake. Brazil increased its control of the oil industry under former President Lula da Silva after it announced in 2007 the discovery of at least 50 billion barrels trapped under a layer of salt two miles below the seabed.
Petrobras, the biggest producer in deep waters plans to double crude output by 2020 with most of the gains coming from the pre-salt that contains the biggest discoveries this century. Libra will require an investment of 400 billion Reais (198bn dollars) over the 35-year concession, which will include 12 to 15 offshore platforms that will pump more than 1 million barrels a day when fully ramped up, according to the oil regulator.
Just 11 firms took part in Monday’s bidding process, fewer than the 40 the Brazilian government hoped to attract Critics say that’s scared off private oil companies and will the slow the development of the offshore finds, which could hold upward of 100 billion barrels.
The legislation calls for a new state company, Pre-Sal Petroleo SA to represent the government with the power to veto decisions at pre-salt projects including Libra.
The auction was held among protests and heightened security including 1.100 Brazilian Army troops in the west end of Rio do Janeiro. Security forces clashed with protestors, firing tear gas to disperse crowds on the streets of Rio.
Unions representing oil workers from Petrobras were among those protesting the partial sale of Brazil's oil reserves. They accuse the government of 'selling off' the country's riches.