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Exxon won the rights to develop 10 oil blocks in Brazil’s deep waters at a Wednesday auction that marks a turn for the local oil industry after years of Petrobras’ reign. The new government hopes to lure back investors by privatizing a string of state companies and by opening up the pre-salt layer oil wealth to all who are interested.
The U.S. giant partnered with Petrobras for six of the ten fields that fetched a total US$1.2 billion (3.8 billion reias). For one of the fields, located in the Campos Basin close to the pre-salt zone, Exxon and Petrobras bid US$700 million (2.24 billion).
This, according to Reuters, is the highest ever bid for a Brazilian oil block. AFP notes that this single bid exceeded the total expected proceeds from the tender. Expected proceeds for the entire auction, according to the head of the National Petroleum Agency Decio Oddone, were US$157 million. Reuters pegged the expected earnings at $529 million.
A total of 287 blocks were auctioned yesterday, but the portion of blocks that actually found investors was small—just 37. Yet, the total proceeds from the auction were certainly impressive. Reuters quoted government officials as saying they had expected 40 percent of the blocks on offer to find takers.
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The results of the auction could be indicative of future interest. This is just the start of a series of auctions that will next delve into the pre-salt fields, with an auction scheduled for October 27. Most of Brazil’s undiscovered oil wealth lies in these pre-salt zones in deep waters, and the industry is eager to explore them.
Norway’s Statoil, French Total, and Shell are already operating in the pre-salt zones. The rest of the supermajors and smaller E&Ps are very likely to follow.
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.