In Auction Without Competition, Brazilian State Gets 67% Of Libra

Author:Felsberg E Associados's Mining Department
Profession:Felsberg e Associados

A consortium of two Chinese state companies (Cnooc e CNPC), two European oil majors (Royal Dutch Shell e Total) and Petrobras made the sole bid for the Libra field, winning the first auction in the pre-salt area of the Santos basin. The consortium offered the lowest oil profit share for the government, at 41.65%, the floor in the auction's rules. Still, officials considered the result a "success," despite the absence of competition and premium.

The auction lasted about 25 minutes, including a presentation of the rules and 3 minutes for the bids' delivery. The sole envelope was delivered 45 seconds short from the deadline, as the consortium wanted to wait for a possible second competitor, since Repsol Sinopec, Malaysia's Petronas and India's ONGC could launch a surprise bid.

The companies of the consortium had already been revealed by industry executives interviewed by Valor in the last few days. Anglo-Dutch oil major Shell and France's Total each bought 20%, while Cnooc and CNPC opted for 10% each, confirming the expected: nobody was willing to compete without Petrobras as a partner.

The Brazilian state company, the sole operator with a 30% mandated stake in any consortium, purchased an additional 10%, silencing the most nationalistic critics who protested against a "privatization of the pre-salt to the Chinese." Monday's auction offered 70% of the field.

In the end, Petrobras was left with 40% of Libra, demanding a R$6 billion signing bonus, the payment for the right to explore the area. The bonus was set in the auction at R$15 billion. Shell and Total will pay R$3 billion each while the Chinese share is R$1.5 billion from each state company. The contract will be signed in Brasília in 30 days.

A projection considering 30 years of production shows that Shell, Total, CNPC and Cnooc will receive close to 18% of the output and about 15% as profit over the investment, Luiz Quintans, a lawyer specialized in oil law, calculates. Considering the Petrobras stake as government oil income, the financial and oil gain for the Union will be around 67%.

The small Chinese participation - Repsol Sinopec decided to stay in the sidelines - showed the level of concern with the risks involved in developing oil and gas production of the giant field auctioned Monday. But officials positively evaluated the results.

"We couldn't imagine a bigger success," said Magda Chambriard, general director of the National Petroleum Agency (ANP).

The auction took place in a...

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