By William Jones, Contributing Reporter RIO DE JANEIRO, BRAZIL – Some of the world’s biggest oil companies have snubbed Brazil’s much-vaunted auction of offshore pre-salt oil blocks as the National Petroleum Agency (ANP) tried to remain positive despite receiving only a fraction of the interest they and the government had hoped for. The Petrobras-owned p-55 platform in construction in Brazil, photo courtesy of Petrobras. U.S. giants Exxon and Chevron, Norway’s Statoil and the UK’s BG and BP all decided against partaking in the auction of the Libra oil field’s acreage, one of the biggest oil discoveries in the world back in 2007. That the auction has taken so long to materialize goes some way to explaining why many oil companies have used the time to concentrate on other markets. The Libra blocks, with their estimated reserves of 8-12 billion barrels of crude, will finally go under the hammer in Brasília on October 21st. Years of wrangling over who should receive the vast royalties generated by the sale look like coming to an end at last. At one stage, the potential diversion of royalties to other states threatened funding for key Olympic infrastructure projects. The heavy costs involved in exploration and production at depths of over 5km, as well as weighty upfront commitments like a R$15 billion signing bonus and high local content commitments, have left several big players already operating in Brazil on the sidelines. A glut of Asian companies have stepped into the breach, however, like Japanese outfit Mitsui and China’s CNOOC and CNPC as the latter country looks to ensure it can fuel its ongoing growth. Part of the deal also means that Brazil’s own oil giant, Petrobras, is guaranteed a minimum thirty percent operating stake in every block, spreading the company’s resources worryingly thin at a time when they are already operating at close to capacity on dozens of other offshore projects. The location of the pre-salt Libra field off the Rio coast, image courtesy of Petrobras. The likes of Shell, France’s Total, Portugal’s Galp Energia and Colombia’s Ecopetrol have, however, paid the R$2.1 million inclusion fee to join the auction next month, and despite only receiving one quarter of the predicted applications, the head of the ANP, Magda Chateaubriand, still called it “the biggest auction in 30 to 40 years around the globe.” “The fact that companies with important production in the area didn’t even sign up for the auction says to me that not everyone is convinced that Libra will live up to its potential”, geologist, industry consultant and former head of geophysics at Petrobras, Wagner Freire told Reuters. “Exxon and the others staying out is also a comment on Petrobras. Strategically, I don’t think they want the trouble of dealing with Petrobras and the government.” The auction will be the first under new rules drawn up by the Brazilian government that place development and profits under greater state control. The absence of many big names makes it likely that Petrobras will simply snap up even more acreage than previously planned and then try to sell on a share once initial exploration has been carried out to make the huge costs involved more attractive. 4 Responses to "Pre-Salt Libra Field Auction Snubbed" Pingback: Petrobras Increases Production | The Rio Times | Brazil News Pingback: Brazil Boosted by 2.3 Percent GDP Growth in 2013: Daily Update | The Rio Times | Brazil News Pingback: 2014 Oil & Gas Expo to Discuss Strategies and Development | The Rio Times | Brazil News Pingback: Petrobras Pre-Salt Clusters Set Record Production | The Rio Times | Brazil News Leave a Reply Cancel Reply Your email address will not be published.