Brazil’s Pre-Salt Auction To Proceed Despite Injunction

The government of Brazil is confident that the auction for its promising pre-salt oil layer will proceed as planned today, after it had appealed an injunction ordering the suspension of the auction issued late on Thursday, Brazilian Mining and Energy minister Fernando Coelho Filho told Reuters.

On Thursday, the leftist Workers Party sought an injunction, and a federal judge in the Amazonas state issued an injunction ordering the suspension of the today’s auction. The Workers Party is against foreign firms operating oil blocks and against reduced powers and roles of state-controlled Petrobras in Brazil’s oil industry.

However, the injunction could easily be overturned, and the government has appealed it.

“We believe the suspension will not remain in place. We will see a great auction,” Coelho Filho told Reuters.

The two oil auctions, the second and third rounds of pre-salt layer auctions, will begin at 9 a.m. local time, oil regulator ANP said in a tweet early on Friday.  

If the injunction is overturned, Brazil will hold today the second and third rounds of auctions for blocks in its pre-salt layer, considered one of the most promising potential developments offshore Brazil.

Last week, ANP said that it might reopen bidding for the oil blocks in the pre-salt layer that don’t receive bids.

Earlier this month, the Brazilian regulator published the list of the companies admitted to bidding in the two rounds. Ten firms were approved to bid in the second round and 14 were cleared to bid in the third round. Bidders include all the oil industry’s heavyweights, including Exxon, Petrobras, Petronas, Repsol, Shell, Statoil, Total, Chevron, BP, CNODC, CNOOC, and Ecopetrol. Each of the two rounds will offer up four blocks for auction.

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The bidding rounds in the pre-salt layer will offer areas for oil and natural gas exploration and production under production sharing agreements. Brazil expects the eight blocks on offer to generate a total of US$36 billion in investments. The development of the blocks is also expected to generate a combined US$130 billion in royalties, profits, and income tax for the Brazilian state. 

Earlier this week, Wael Sawan, Executive Vice President Deepwater at Shell, said that the supermajor would be bidding in the auction and was confident that it can produce oil from Brazil’s pre-salt layer for less than $40 per barrel.  

By Tsvetana Paraskova for Oilprice.com

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