Petrobras Agrees to New Terms for Pre-Salt Auction

Brazil's government and state producer Petrobras have agreed on sweetened terms for an auction that could grant global oil companies the opportunity to partner with the firm in the Sepia and Atapu pre-salt fields. Sepia and Atapu are two fields in the core of Brazil’s pre-salt known as the Transfer of Rights (TOR) area, which is considered prime acreage. Under the new agreed framework, Petrobras would get a 39.5% stake in Atapu with a payment of $3.253 billion as compensation for work already completed, while a 60.5% stake would be offered to a partner. At Sepia, the Brazilian state producer would get a 31.3% stake and $3.2 billion for past work, with a 68.7% share for the partner. Brazil's Mines & Energy Ministry said the agreement represents another step toward holding another bid round for the pair of TOR fields, after the last one, held in 2019, failed to find any takers due to what were seen as unattractive terms (OD Nov.8'19). That was a common theme for the pre-salt auctions that year, with results coming in well below government expectations. Regulators vowed to sweeten the terms in subsequent rounds to attract more investment, but those sales were postponed due to the Covid-19 pandemic. The updated terms divulge more details on the front end and aim to bring "greater predictability, attractiveness and competitiveness to the new event, in order to guarantee the best result for the state," Brazil's energy ministry said in a statement. With a Little Help In 2010 the Brazilian government granted Petrobras the rights to produce up to 5 billion barrels from the TOR area, but has since opened up more opportunities in the zone to global operators as Petrobras’ plate has filled with other ambitious pre-salt projects (OD Aug.17'20). The 2019 auctions offered up four TOR fields -- Buzios, Itapu, Sepia and Atapu -- but the only two bids submitted were from consortia led by Petrobras. The Brazilian firm splashed out nearly $16 billion in signing bonuses for a 90% stake in Buzios -- with Chinese firms CNODC and CNOOC each holding 5% shares -- and a 100% interest in Itapu (OD Nov.7'19). However, Sepia and Atapu did not attract any bids from the 14 firms participating in the bid round due to the high price demanded and the lack of an operating role (OD Nov.5'19). Petrobras has already begun developments in Sepia and Atapu after being granted rights to produce up to 500 million barrels of oil equivalent and 550 million boe, respectively. Brazil has rescheduled its 17th bid round to take place in October (OD Aug.18'20). The round will cover some 128 offshore blocks under a concession agreement. Other bid rounds are being planned, including an 18th concession round and an offer of new pre-salt areas under production-sharing contracts, but have yet to be scheduled. Kathrine Schmidt, Houston