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Brazil will hold an offshore oil deposit auction in October featuring blocks that were the object of a long-running dispute with state energy giant Petrobras.
Reuters reports, citing Economy Minister Paulo Guedes, that participants in the auction will need to cough up a signing bonus of a total US$26.9 billion for the four blocks.
The blocks, located in the presalt zone off the Brazilian coast, are part of an area the government awarded for exploration and development to Petrobras a decade ago. Under the original deal, it had the right to extract 5 billion barrels of oil and gas based on the oil prices at the time. The complex provisions of the contract, however, included a review of the costs in the area after it was declared commercially viable in 2014.
Both parties—the government and Petrobras—have claimed that they are owed billions of U.S. dollars, and the oil company has also disputed the estimates of the reserves in the area made by the country’s oil regulator, ANP.
The state oil firm has explored the area and found that a lot more oil lies in this low-risk offshore zone. There are estimates that the transfer-of-rights area could hold up to 15 billion barrels of oil in excess of the 5 billion barrels to which Petrobras was entitled to produce when the government transferred the area to the state firm in 2010.
The four blocks to be auctioned in October contain that excess 10 billion barrels in reserves.
Meanwhile, Petrobras and the Brazilian government have all but settled their differences regarding the transfer of rights to the area. Last month, Reuters cited Brazilian media as saying the government was likely to pay Petrobras some US$10 billion, which was lower than a previously reported US$14 billion but still a substantial sum.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.