On 28 September, Brazil held its sixth oil and gas bid round in just over a year, with similar success to previous editions; this time awarding all four blocks on offer in the prospective pre-salt area, and raising R$6.82 billion (£1.31 billion) in signature bonuses. Exploration investments are forecast to reach R$1 billion (£189.44 million), and bidders offered an average premium on the minimum profit oil share for the government of 170.58%.

The 5th pre-salt bid round offered production sharing contracts (PSCs) for the exploration and production of oil and natural gas in four areas: Saturno, Titã, Pau-Brasil and South-West Tartaruga Verde.

Petrobras, the state oil company, has a priority right in the operation of blocks offered within the pre-salt area, which it has taken full advantage of in other recent rounds. In this round, Petrobras’ interest was more modest, confining itself to a 100% interest as operator in South-West Tartaruga Verde.

Saturno

The Saturno block, in the Santos Basin, was expanded to include two areas that were intended to be offered under concession terms in the 15th licensing round, but which the National Accounts Court (Tribunal de Contas da União) had ordered to be removed on the eve of that auction (see Brazil’s 15th Oil & Gas Licensing Round -Offshore Exceeds Expectations).

It was contested between consortia led by Shell and ExxonMobil. Shell prevailed, taking a 50% operated interest, partnered by Chevron, with the other 50%. The Shell consortium offered the state a profit oil share of 70.2%, which was significantly higher than the 42.49% offered by ExxonMobil (64%) and Qatar Petroleum International (36%). In fact, it represented a premium of around 400% on the minimum share required by CNPE Resolution No.11/2018.

Shell and Chevron will pay a fixed signature bonus of R$3.13 billion (£596.70 million).

Titã

The Titã block also saw competition between Shell and Exxon, however this time their fortunes were reversed. Located in the Santos Basin, it received bids from two consortia. The winning consortium consisted of ExxonMobil (64% as operator) and Qatar Petroleum International (36%). The consortium offered the state a profit oil share of 23.49%, which exceeded the 11.65% offered by Shell and Chevron. The winning bid represented a premium of around 200% on the minimum that was set at 9.53%.

The government asked for a fixed signature bonus of R$3.13 billion (£596.70 million), which the winning consortium will pay.

Pau-Brasil

Pau-Brasil is also located in the Santos Basin. It attracted tight competition from two consortia. The first consortium consisted of BP (50% as operator), Ecopetrol (20%) and CNOOC (30%). The consortium offered the state a profit oil share of 63.79%, as against a minimum of 24.82%. The second consortium, consisting of Total (40% as operator), CNODC (20%) and Petrobras (20%) came a close second, offering 62.4%.

The winning consortium will pay the signature bonus, which was fixed at R$500 million (£94.75 million) to be paid by the winning consortium.

Sudoeste de Tartaruga Verde

Petrobras faced no competition in its bid for the South-West Tartaruga Verde area located in the Campos Basin. It bid the minimum profit oil share of 10.01% and will acquire a 100% interest. South-West Tartaruga Verde is expected to contain relatively small volumes of oil that are unitisable with the Tartaruga Field, which is already under development by Petrobras. Petrobras will pay a fixed signature bonus of R$70 million (£13.31 million).

The conclusion of this round marks the end of a fruitful cycle of licensing activity during 2017 and 2018 in which four bid rounds offered production sharing contracts in the pre-salt area, and two rounds offered concession contracts in other areas. Over a year and a day, the rounds raised nearly R$28 billion (£5.32 billion) in signature bonuses for Brazil, with the award of 72 blocks.

Under the current government, the National Council for Energy Policy (CNPE) has planned oil and gas auctions until 2021. However, the upcoming presidential election, which will take place in one week, have cast some uncertainty over future licensing activity. Depending on the winner of those elections, the scheduled auctions may be revised, as well as concession and PSC terms for future bid rounds.

The uncertainty over the next years may have increased the interest in this 5th pre-salt round, as evidenced by the competition over Pau-Brasil, an area that received no bids when it was offered in October 2017. It is to be hoped, however, that the incoming government maintains policies that are attractive to oil and gas investment, particularly considering the industry’s significant economic contribution to government revenues and employment.