Rio de Janeiro—Brazil slashed its signing bonuses and profit-oil guarantees for the sale of the Atapu and Sepia fields now scheduled for December, significantly improving terms to develop the subsalt oil and natural gas deposits amid greater global competition for the oil industry's investment dollars, the Mines and Energy Ministry said April 20.
Under terms approved by Brazil's National Energy Policy Council, or CNPE, Atapu will be sold for a signing bonus of $721 million and minimum profit-oil guarantee of 5.89%. That was down from a signing bonus of $3.4 billion and minimum profit oil of 26.23% at the previous sale held in November 2019.The signing bonus for Sepia was set at $1.3 billion, with a minimum profit-oil guarantee of 15.02%, the ministry said. That was down from a $5.6 billion signing bonus and 27.88% profit-oil guarantee at the November 2019 production-sharing auction.
Both Atapu and Sepia failed to generate offers during the 2019 sale.
The changes were aimed at making Brazil's second production-sharing auction of subsalt oil fields in the so-called transfer-of-rights areas more attractive to international oil companies after lackluster results at the most-recent sale. International oil companies largely sat out two production-sharing auctions held in November 2019 because of high signing bonuses, onerous profit-oil guarantees and reimbursements for investments in the fields already made by state-led oil company Petrobras.
Mines and Energy Minister Bento Albuquerque and other government officials said at the time that changes would be evaluated, including a potential end to the use of the production-sharing regime. While the coronavirus pandemic has slowed bigger reform efforts, the government delivered on substantial changes compared to the first transfer-of-rights production-sharing auction.
Petrobras investmentsOil companies were also granted additional clarity about the cost of snapping up a stake in the two fields after Petrobras and government subsalt management company Pre-Sal Petroleo SA, or PPSA, reached an April 9 deal on reimbursements for development investments. Atapu entered production in June 2020, while Sepia is expected to pump first year in the second half of 2021.
Winning bidders will pay Petrobras $3.25 billion for investments at Atapu and $3.2 billion for Sepia, according to Petrobras and PPSA. Petrobras will retain a 39.5% operating stake in Atapu and 31.3% stake in Sepia. That means the second transfer-of-rights production-sharing auction will feature a 60.5% equity stake in Atapu and 68.7% stake in Sepia, with both fields likely already in production.
The top consortium would reimburse Petrobras for the investments made at each field and then can deduct the payments from profit-oil calculations, according to the agreement.
Market conditions for the next transfer-of-rights sale should also be improved, with international oil prices solidly above $60/b as global coronavirus vaccine efforts expand and demand rebounds. The transfer-of-rights auction represents a rare opportunity to buy a slice of fresh, low-sulfur light oil production from Brazil's massive subsalt frontier, where a single well can produce as much as 60,000 b/d of oil equivalent.
The transfer-of-rights regime covers subsalt acreage that Petrobras was granted development rights to in a 2010 oil-for-shares swap with the government. Petrobras received the rights to pump 5 billion barrels of subsalt acreage owned by the government. During exploration, however, Petrobras found about 15 billion additional barrels of recoverable reserves. The transfer-of-rights production-sharing auctions feature the sale of the excess oil and natural gas volumes that Petrobras discovered.
The Atapu Field is already in production, pumping about 69,000 b/d of oil equivalent via the FPSO P-70 floating production, storage and offloading vessel that entered operations in June 2020. The FPSO has installed capacity to produce 150,000 b/d and process 6 million cu m/d. The FPSO P-70, which was installed in waters 2,300 meters deep about 200 kilometers off the coast of Rio de Janeiro state, will be connected to eight production and eight injection wells.
Petrobras estimated that Atapu held about 550 million recoverable barrels of oil equivalent when the field was declared commercially viable for development in December 2014. The ANP, however, estimated that the field could hold 2.5 billion-4.0 billion boe.
The FPSO Carioca, meanwhile, arrived in Brazil in February, where it's expected to complete the installation of processing modules before being installed at the Sepia Field about midyear, according to Petrobras. The FPSO has installed capacity to pump 180,000 b/d and process 12 million cu m/d.
Sepia was estimated to hold 500 million barrels of recoverable reserves when Petrobras declared it commercially viable for development in September 2014. The ANP estimated the field could hold 500 million-700 million barrels of recoverable reserves.
