Sept. 19 (Bloomberg) -- Three of the world’s top 20 oil companies by market value didn’t submit bids for Brazil’s largest oil field amid lower-than-expected interest in the deposit, the country’s oil regulator said.
Exxon Mobil Corp., BP Plc and BG Group Plc didn’t register for the Libra field before yesterday’s deadline, Magda Chambriard, the head of Brazil’s oil regulator, told reporters in Rio de Janeiro today. The number of participants was about a quarter of the more than 40 companies expected by the regulator, Chambriard said. Eleven companies formally registered to bid in the auction, the regulator, ANP, said in an e-mailed statement, without identifying them.
While Exxon, BP and BG didn’t bid because of “company-specific reasons,” the trio are still interested in a presence in Brazil, Chambriard said, without elaborating. The companies called to inform her of their decisions, she said.
Brazil is auctioning Libra, estimated to hold as much as 12 billion barrels of recoverable crude, under a new model for the so-called pre-salt region where state-controlled Petroleo Brasileiro SA is guaranteed operating control of new projects. Libra will be auctioned under a profit-sharing model where Petrobras and partners will give the government at least 41.65 percent of production after deducting output to cover costs. The government will choose the group that offers the most so-called profit oil.
“Supermajors have a strong preference for operating projects of this size, that’s an important reason why you would see a company like Exxon not wanting to get involved,” T.J. Conway, a research and advisory manager at New York-based Energy Intelligence Group, said by telephone from Washington.
“A more natural fit than a supermajor would likely be national oil companies that are seeking big volumes and are comfortable with non-operated positions,” Conway said.
Exxon, BP and BG all won acreage in Brazil’s most recent auction in May when the country sold onshore and offshore licenses on the northeastern coast.
“After reviewing this opportunity, we decided not to participate in the Libra bid round,” Patrick McGinn, an Exxon Mobil spokesman, said in an e-mailed reply to questions. “We continually look for new exploration and development opportunities around the world where we can leverage our experience and technology, and we look forward to evaluating potential opportunities in Brazil.”
BP and BG didn’t immediately reply to e-mails seeking comment.
BG has the largest exposure to the pre-salt area of any foreign oil company with a 25 percent stake in the concession that holds Lula, the second-biggest discovery in Brazil after Libra. BP expanded in Brazil when it bought nine blocks from Devon Energy Corp. in 2011 for $3.2 billion.
UBS AG expected “low interest” in the auction, analysts led by Lilyanna Yang said in a Sept. 4 note to clients. It will take until 2021 to start selling crude from Libra, about two years longer than ANP estimates, and higher-than-expected levels of natural gas at the field will increase extraction costs, the UBS analysts said.
There probably won’t be more than two groups competing for Libra, Conway said. The 15 billion reais ($6.8 billion) signing bonus makes it “nearly impossible” for smaller oil companies to compete, he said.
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