Shell Wins Three Blocks in Brazil's Offshore Auction

Brazil awarded six of the eight blocks on offer in two rounds of bidding for its pre-salt region, with Royal Dutch Shell and its partners winning three.

Development of the blocks will lead to 100 billion reais ($31 billion) in investment from the winning companies. “Brazil is back to the global oil market scene”, said ANP’s director general, Décio Oddone.

The newly acquired blocks range 160-310 kilometers from shore. The wins boost Shell's position as the largest foreign operator in Brazil's offshore sector, adding more than 1,700 square kilometers (656 square miles) to its deep-water Brazil portfolio. The winning bids include a block adjacent to Shell’s Gato do Mato field (Shell 80 percent operating share, Total 20 percent), a now unitized area to the Sapinhoá field (Petrobras 45 percent operating share, Shell 30 percent, Repsol 25 percent) and the new Alto de Cabo Frio – West block (Shell 55 percent operating share, Qatar Petroleum 25 percent, CNOOC 20 percent).

Prior to these bidding results, Shell had previously stated plans for $10-billion investment into the early 2020s for its existing offshore developments in Brazil to support deep water as its Upstream growth priority. Shell first began working under a production sharing contract in Brazil in 2013 when it entered the Libra consortium, led by Petrobras. Shell currently operates two FPSOs in Brazil and is a partner in 10 other FPSOs operated by Petrobras.

Statoil Boosts its Position

Statoil Brasil Oleo e Gas, a subsidiary of Statoil, ExxonMobil Exploracao Brasil, a subsidiary of Exxon Mobil Corporation, and Petrogal Brasil, a subsidiary of Galp, were the high bidders for a production sharing contract for the Carcará North block (Statoil 40 percent operating share), ExxonMobil (40 percent) and Galp (20 percent).

Statoil, ExxonMobil and Galp have also agreed a number of subsequent transactions in the adjacent BM-S-8 block to align equity interests across the two blocks that together comprise the Carcará oil discovery. 

Legislation Change

The bidding rounds' success was the result of regulatory changes made by the Brazilian government and the appeal of the areas, since the Brazilian pre-salt has one the greatest potentials of reserves to be developed in the world, said Brazil's offshore regulator ANP. Among the improvements in legislation is the end of the mandatory participation of Petrobras as the sole operator in the pre-salt, which created opportunities for other companies.

According to the legislation, Petrobras has the preemptive right to act as operator in the pre-salt blocks. The company chose to be the operator in three blocks.