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Big Oil will likely snub Brazil’s huge oil auctions next year, just as they did in this year’s highly anticipated bid rounds, because projects and prospects around the world are competing for the majors’ disciplined capital spending, the head of BP in Brazil told local economic daily Valor Economico in an interview.
Assets in other countries will be more attractive than Brazil’s resources, BP Energy Brazil’s president Adriano Bastos told Valor Economico.
The foreign oil firms who stayed away from the two auctions last week will not “come back next year,” even if Brazil were to sweeten the offers for the companies, according to Bastos. Other projects in the world will enter the companies’ portfolios, reducing Big Oil’s spending capacity to invest in Brazil, BP’s manager said.
BP did not bid in the auctions last week because it needed further negotiations with state oil firm Petrobras for investments it has already made in the pre-salt layer offshore Brazil, Bastos told the newspaper.
Last week, the two oil auctions, which Brazil had hoped would result in blockbuster offers and competition, ended in failures. This year’s final oil auction in Brazil ended in a flop last Thursday, with Big Oil staying away from bidding and only one of five blocks awarded, suggesting that the massive upfront payments and complex royalty schemes have kept the world’s largest oil companies from participating.
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The underwhelming results of the final oil auction for the year came a day after another near-flop in the biggest oil auction ever held in Brazil, in which Big Oil didn’t bid and Petrobras picked up two of the four blocks on offer.
Commenting on this auction, Marcelo de Assis, head of Wood Mackenzie’s Latin America upstream research, said:
“We live in a world where there is focus on capital discipline and on value instead of volume. And with the energy transition on the horizon, there is no appetite for an oil carnival at any cost.”
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.