Brazil Oil Auction Bids Poised to Beat 2007 Record, De Luca Says

Brazil is set to break the $1.1 billion record from auctioning oil exploration licenses in the first round since 2008 that offers areas on land and in deep waters, said the head of the Brazilian Oil Institute.

“I think it could be more, it will be very competitive,” Joao Carlos de Luca, who is also chairman of Barra Energia Petroleo & Gas, said in an interview today in Rio de Janeiro, where the auction is being held.

The Foz do Amazonas basin has attracted the most interest, Magda Chambriard, head of the National Petroleum Agency, told reporters at today’s event. Bid volumes could reach 2 billion reais ($1 billion), slightly less than the $1.1 billion from offshore areas sold in 2007, the current record, she said.

Sixty-four companies have registered to bid for 289 blocks spread over 11 basins that regulator ANP estimates hold 36.7 billion barrels of oil equivalent. That’s about 14 years worth of domestic consumption, based on a 35 percent industry average recovery rate. The government had estimated the auction would generate 5 billion reais to 10 billion reais for public spending.

In 2007, Brazil sold licenses spanning nine basins including Campos, the source of more than 80 percent of the country’s oil output and 35 percent of its natural gas production. Later that year the country announced at least 50 billion barrels of oil in the so-called pre-salt region in deep waters of the Atlantic that holds Lula, the biggest discovery of this century.

Ghana-Like

Brazil hasn’t sold any exploration tracts since 2008, when it auctioned blocks on land.

Most of the areas up for auction today and tomorrow are in virgin waters off the coast of northeastern Brazil where discoveries in similar geology across the Atlantic in Ghana and Ivory Coast yielded major discoveries. Tullow Oil Plc in 2011 sparked interest in the region with the Zaedyus find off the coast of French Guiana.

Contestants in Brazil’s first oil auction in five years range from Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX), the largest U.S. producers by market value, to Brazilian startup Ouro Preto Oleo & Gas, a government registry shows.

To contact the reporters on this story: Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net; Rodrigo Orihuela in Rio de Janeiro at rorihuela@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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