Total Joined Consortium After Fear Of Political Meddling Waned

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

The choice of the executives for Pré-Sal Petróleo SA (PPSA), state-owned company that will manage the contracts of oil fields auctioned under the production-sharing model, last week, was "absolutely crucial" for the decision of France's Total to take part in the Libra field auction on Monday, Total's top executive in Brazil, Denis Palluat de Besset, said.

"The president and all directors [of PPSA] are people who know this type of work, they are not people who will handle this in a political way, for us it was fundamental," Mr. Besset said.

The French company joined the consortium formed by Petrobras, China's CNPC and Cnooc and Anglo-Dutch major Shell to get the Libra field in the pre-salt of the Santos basin. The winning bid was the minimum set in the auction rules, with 41.65% of the surplus oil going to the Union.

Mr. Besset had raised the issue of PPSA's formation in a public hearing on the invitation for bids that the National Petroleum Agency (ANP) held. The executive then declared that it was difficult to define the participation without knowing what the PPSA formation was. In practice, the state-owned company will supervise the consortium's accounting, with powers to allow or deny expenses to be deducted before the payment in oil for the Union.

André Araújo, president of Shell Brasil, said Monday that he didn't see the presence of PPSA in managing the Libra contract as a risk factor. "We already knew the contract's conditions for some time, it's not a surprise what came today," he said.

Messrs. Besset and Araújo said the bid was result of studies conducted by the consortium since the tender notice was published. "The studies we've made showed us that this percentage ensures the minimum of return," Mr. Besset said.

Above the 41.65% of oil to the state offered, Mr. Besset said, "it would be [economically viable], but [it would bring] little profit."

He said the R$3 billion (about $1.4 billion) of the French share in the signing bonus for Libra will come from France and will be paid in a month to ANP, in dollars. Mr. Araújo declined to say how Shell will make the bonus payment.

Helder Queiroz, director of ANP, said the contract's signing is slated to happen in a month. And the bonus payment must be made some days earlier.

With Libra, Total will now have 13 blocks...

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