Chevron wins acreage in Brazil pre-salt debut

Brazil's fourth production-sharing round marked the debut of oil major Chevron in the country's pre-salt formation.

The US company will have a 30% stake in the consortium that will operate the Três Marias block along with Brazilian state-run firm Petrobras, which will also have 30%; and Shell, with the remaining 40%.

Oil majors had a strong participation in the auction. The Dois Irmãos block was awarded to a Petrobras-led group that included Equinor and BP.

In the Uirapuru area, which was the block receiving the most bids, the winner was a consortium formed by Petrogal, Equinor, and Exxon. Petrobras decided to join the group after its joint bid with Total and BP lost.

Brazilian law gives Petrobras preferential rights in production-sharing auctions, which means the NOC can choose to join winning bids.

"We have a very positive view of the results, we will operate all three areas awarded and we are continuing our initiative to increase investments in exploration," said Petrobras' recently appointed CEO Ivan Monteiro.

According to Equinor's country manager in Brazil, Anders Opedal, the company chose to participate in the Uirapuru area due to the proximity of the block with its discovery at Carcará.

"We think there is a similar geology in that area. There are a lot of similarities there and a lot of synergies to the development of these fields," the executive told journalists after the auction.

Shell also celebrated its winning bid. "This will help us build a world-class portfolio in one of the priority areas for Shell's growth. Our plan now is to know more about this new acquisition and to talk with our partners about the work strategy," country manager André Araújo said in a statement.

In total, the Brazilian government raised 3.15bn reais (US$825mn) in the auction. The forecast of investments for the areas awarded is 738mn reais.

Watchdog ANP forecasts the round to generate 40bn reais in fiscal revenue over the next 30 years from tax income and the country's stakes in the production of the areas.

"Brazil's government will have a participation of 90% in the revenue of some of the areas awarded. These are results not seen even in the Middle East," said ANP director Décio Oddone after the auction.

NEXT ROUNDS

The Itaimbezeinho area was the only block that did not receive any offers during the fourth production-sharing round, something that did not come as a surprise to the ANP.

"Brazil's pre-salt demands long-term investments, with an intensive capex. There only a few companies in the world that are capable of working on this area both from a financial and a technical perspective, and we had almost all of them participating in our last auctions," Oddone said.

João Vicente, the executive secretary of the energy ministry, said that Itaimbezinho might be included in the country's permanent offer, though it will depend on approval from energy policy council CNPE to offer pre-salt areas in this new bidding model, which is currently not covered by Brazilian law.

Vicente expects the move to be greenlighted by the end of the year, together with the approval of the production-sharing rounds to be held in 2020 and 2021.