Is Brazil really going to auction the pre-salt region?

By Eric Watkins
Brazil continues to titillate potential buyers with its slow release of news about upcoming auctions – especially for the highly touted pre-salt region. But will the pre-salt region ever come under the hammer?

Brazil’s Minister of Energy and Mines Edison Lobao said his country will hold its first auction of pre-salt oil and gas blocks this year under the new production-sharing regime approved recently by congress.

Lobao, who has been reappointed minister in the new government of President Dilma Rousseff, also said that Brazil will hold an 11th round auction of concessions for non pre-salt oil blocks – the first auction to be held in Brazil since 2008.

But was Lobao saying more than he was authorized to say?

Apparently, final approval for the auctions is still required from the country's Conselho Nacional de Política Energética (CNPE), according to a spokesman for the Agencia Nacional do Petroleo (ANP).

Still, even the ANP spokesman nudged the news along, saying that the first pre-salt auction is expected to include some of the reserves discovered in the Libra field, which the ANP recently estimated as holding recoverable reserves of 3.7- 15 billion boe.

That’s an unusually broad range, and especially so given the fact that the estimate was based on a single, partially-drilled well.

Meanwhile, in the run-up to any auction, Brazil continues to tout the successes achieved in the pre-salt region.

Brazil’s state-run Petroleo Brazileiro SA (Petrobras) submitted a declaration of commerciality for the Tupi and Iracema areas to the ANP, saying that the total recoverable volume is 8.3 billion boe for the two fields: 6.5 billion boe for Tupi and 1.8 billion boe for Iracema.

“The exploratory success achieved in the area represents the high potential of pre-salt, which is already contributing to the growth of the company's production curve and of its oil and gas reserves,” Petrobras said.

Does that sound like an advertisement for the coming pre-salt auction? You can be sure of that as Brazil wants the maximum buck for any rights it sells to develop what claims is the slam-dunk potential of the pre-salt region.

After all, it is not just going to give the stuff away! What would that tell the country’s long-suffering poor – and their representatives in Congress – who are expecting new regulations to bring them unparalleled benefits?

Still, not everyone is onboard with Brazil’s figures – a point underlined by Petrobras itself which recently criticized partner BG for announcing estimated reserves considerably lower than those of the state-run firm (OGJ Online, Dec. 20, 2010).

There’s a fly in every ointment.

Contact Eric Watkins at hippalus@yahoo.com
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