An auction next month of oilfields in Brazil may be the priciest ever held, raising at least US$ 50 billion in licensing fees and compensation. Exxon Mobil Corp., Royal Dutch Shell Plc and other energy giants are set to vie for deep-sea deposits that could hold 15 billion barrels of oil, almost twice as much as Norway’s reserves.
Winners at the Nov. 6 auction are expected to pay US$ 25 billion in licensing fees, plus share a portion of their production with the government. In addition, bidders will need to negotiate payments to state-controlled Petrobras for investments it has already made in the area.
Those payments could add another US$25 billion to US$45 billion in costs, according to reports in the Sao Paulo media.
The auction is unique in part because one of the four areas being offered is already gushing more than half of the daily output from Venezuela. It’s a rare opportunity for an industry more accustomed to exploring riskier offshore prospects that can take a decade or more to develop.
The offerings are at the heart of the pre-salt, a giant expanse of oil deposits about the size of Ohio trapped beneath a layer of salt under the Atlantic seabed. The four prospects -- Buzios, Itapu, Sepia and Atapu -- are estimated to hold as much as 15 Bbbl of recoverable crude, according to a study by Houston-based consultancy Gaffney, Cline & Associates.
Buzios is already Brazil’s second-largest field by production, with output of about 425,000 bpd -- at a time when Venezuelan production is running at 700,000. It has four platforms that are tapping about a dozen wells, with room for other wells to be drilled and the current ones to be ramped up further.
Brazil’s federal audit court estimates the compensation to Brazil’s oil company could reach US$ 45 billion under proposed guidelines. It has recommended the government lower certain parameters like the estimated price of Brent crude to make the deals more attractive. However the court’s estimates and recommendations for the sale are confidential.
The Brazilian Petroleum Institute, an industry group that represents some of the bidders, estimates the payments to Petrobras will be worth between 120 billion and 130 billion reais (US$29 billion-US$31 billion). A study by Wood Mackenzie Ltd. released Monday estimates US$24 billion.
As for the licensing payments, the largest chunk of the US$ 25 billion will be due this year and the remainder in 2020, all in cash.