Brazil's National Petroleum Agency, or ANP, sold just a single offshore block at the country's second open acreage bid round held Dec. 4, while several onshore players consolidated positions ahead of the government's moves to open up the gas market in Latin America's biggest economy.
The lack of competition for the 35 offshore blocks on offer will lead to a further review of Brazil's licensing terms, mines and energy minister Bento Albuquerque said, noting that Congress is already debating changes to the country's production-sharing regime and should implement additional reforms in 2021.
"The analysis starts now," Albuquerque said.
Despite lackluster offshore bidding, Albuquerque and acting ANP director general Raphael Moura noted the entry of several new players and the purchase of acreage in areas that had never before been explored. In addition, signing bonuses nearly doubled to $10.9 million from the $4.3 million raised at the first open acreage auction held in September 2019.
Government officials also indicated that the open acreage model will continue and very likely be expanded into areas further offshore (beyond 200 nautical miles offshore) as well as potential sites for carbon capture and subterranean natural gas storage.
The auction represented the only chance oil companies had to purchase onshore and offshore exploration and production concessions this year after Brazil canceled plans to hold the 17th bid round, seventh subsalt production-sharing auction and second transfer-of-rights sale in 2020 because of the coronavirus pandemic. The 17th bid round and second transfer-of-rights sale are expected to be held in the second half of 2021, according to government officials.
The offshore bidding featured shallow-water, deepwater and ultradeep-water blocks in the Campos and Santos basins, some of which held subsalt potential. Similar blocks generated heated competition at bid rounds held in 2017-2019 and were responsible for record signing bonuses.
The offshore sectors were included after oil companies declared interest and paid non-refundable offer guarantees, meaning that the outlook for the blocks changed since nominations were closed in October.
STRONG PLAYS
Shell snapped up the C-M-757 block in the Campos Basin, which holds potential subsalt targets but sits outside the subsalt polygon that requires production-sharing contracts to develop. Shell also purchased the C-M-659 and C-M-713 blocks directly to the north of the C-M-757 block in the 16th bid round held in November 2019.
"Today's auction once again demonstrates the continuity of our investments in Brazil, a country that [accounts] for about 13% of the company's total global oil and gas production," Shell Brasil CEO Andre Araujo said in a statement. "This new block will consolidate our extensive portfolio in Brazil, where we have acted as operators since the start of the 2000s."
Shell paid a $2.3 million signing bonus for a 100% stake in the block. Shell now holds stakes in 23 exploration blocks, one field in development and 14 fields in production across Brazil.
Robust onshore bidding
Onshore bidding was more robust as local gas-to-wire player Eneva consolidated positions in the Amazonas, Parana and Solimoes basins, including offering the sale's highest signing bonus for the Jurua mature accumulation at $4.9 million. The acreage will combine well with Eneva's current operations as well as an expected bid for state-led oil company Petrobras' nearby Urucu field.
Petrobras confirmed Dec. 4 that the company had received binding offers for Urucu from Eneva and 3R Petroleum Oleo e Gas SA, totaling $600 million and $1 billion, respectively. The offers are currently being evaluated, Petrobras said.
Eneva paid $3.2 million in signing bonuses to acquire 100% stakes in the Amazon Basin's AM-T-62, AM-T-84 and AM-T-85 blocks.
Brazilian independent oil and gas producer Enauta also teamed with Eneva to take a 30% minority stake in four blocks in the Parana Basin. Eneva will own a 70% operating stakes in the blocks.
The two companies paid $408,000 in signing bonuses for the areas, which represent Enauta's first foray into onshore exploration and production. The company is currently evaluating whether it will continue to develop the offshore Atlanta field after partner Barra Energia exited the project.
Local onshore player Imetame and new arrival ENP Ecossistemas joined forces to buy seven blocks in the onshore Espirito Santos Basin. ENP is led by Marcio Felix, who previously served as the oil and gas secretary at the mines and energy ministry. ENP wants to build a gas hub in Espirito Santo state.
The presence of Enauta, which is led by former ANP director general Decio Oddone, and ENP also lent additional weight to the sale, according to industry officials. The two executives played prominent roles in Brazil's establishment of the New Gas Market in 2019 while at their respective government posts. The purchases by companies they now lead underscore Brazil's commitment to open markets and development of a strong environment for small- and medium-sized companies, one official told S&P Global Platts.
