Exxon Mobil Corp. (XOM), the world’s most valuable oil producer, teamed up with billionaire Eike Batista to search in Brazilian waters as the country raised a record amount in its first oil bidding round in five years.
A partnership between the Irving, Texas-based company, which failed to make major discoveries in previous exploration efforts in Brazil, and Batista’s OGX Petroleo & Gas Participacoes SA won rights for one offshore block in the Potiguar basin and another in Ceara. The so-called Round 11 auction staged by regulator ANP yesterday also saw BP Plc (BP/) and Total SA, Europe’s biggest producers after Royal Dutch Shell Plc (RDSA), win licenses off Amapa state in the largest single bid.
Brazil, home to the biggest crude discovery in the Americas in more than 30 years, raised a record 2.8 billion reais ($1.4 billion) by selling licenses at 142 of the 289 blocks for sale. Exxon returns to the country while Total expands into the Foz do Amazonas basin bordering French Guiana and BG Group Plc becomes an operator for the first time.
“The competition was stronger than I expected,” Joao Carlos de Luca, the head of the Brazilian Oil Institute, told reporters in Rio de Janeiro. “We have great new operators in the country. The return of Exxon is an important factor.”
Brazil’s first sale of oil permits since 2008 will give Exxon a chance to resume exploration in the country after it drilled dry holes and returned a license last year in the so-called pre-salt region.
Investment Plan
Exxon, which also explored Foz de Amazonas in 2001 and 2002, will have a 50 percent interest in the two new blocks it won with OGX and will operate both, spokesman Patrick McGinn said by telephone, declining to comment further.
The 30 winning companies will invest a minimum of 6.9 billion reais to develop the areas that span 11 sedimentary basins on land and off the coast of north and northeastern Brazil.
A partnership between Total, BP and state-run Petroleo Brasileiro SA made the largest single bid of 346 million reais for the FZA-M-57 block in deep waters of Foz do Amazonas.
“The super consortium that took shape for the equatorial margin is Total, BP and Petrobras,” de Luca said, noting that Total will operate the block. “Petrobras teaming up with other companies is very good for the sector.”
‘Acted Aggressively’
Batista’s OGX, the Rio de Janeiro-based company that has lost 84 percent of its market value in the past year, also won licenses for 10 blocks in five basins bidding without partners and an additional 30 percent stake in a block together with Total and QGEP Participacoes SA. (QGEP3)
OGX is taking on new exploration projects even as the company sells stakes in fields, reduces staff and cuts costs after losing investor confidence amid missed production targets. Brazil’s worst-performing stock last year has plunged an additional 57 percent this year after lower-than-expected output rates.
OGX agreed to pay 377 million reais for the exploration licenses, including its share in blocks won with partners, according to ANP data. The company missed out on rights in four other blocks where offers were presented in conjunction with Exxon. OGX committed 16 percent of its cash to the new licenses, according to Banco Santander SA analysts Christian Audi and Vicente Falanga Neto. The Rio-based company would be better served focusing on development of its existing assets, they wrote in a note to clients dated today.
China Absence
“Once again the company acted aggressively, which is a characteristic of OGX and of Eike Batista,” Adriano Pires, the head of the Brazilian Center for Infrastructure, a consulting firm in Rio de Janeiro, said in a telephone interview. “Nobody expected that given the complicated situation the company is having lately. They took onshore and offshore blocks.”
OGX Chief Executive Officer Luiz Carneiro said in an e-mailed statement today the acquired offshore blocks are located in a “highly promising area.” “This is clearly an exciting time for Brazil’s oil and gas industry,” he said.
Winners of the auction, held at a Rio hotel, also included Brazilian startup Ouro Preto Oleo & Gas SA and Colombia’s Ecopetrol SA. (ECOPETL) Chief oil regulator Magda Chambriard told reporters she was surprised by a lack of bids from Chinese companies.
Amazon Basin
BP and Total agreed to pay 621.5 million reais for the offshore Amazon basin concessions. BHP Billiton Ltd. won bidding for two blocks in the same basin, the Melbourne-based mining company’s first oil assets in Brazil.
Most of the areas auctioned yesterday 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.
“The bidding has been aggressive,” Thore Kristiansen, head of Statoil ASA in Brazil, told reporters after the Stavanger-based company won blocks in ventures with Petrobras and Total. “The bidding has shown it’s been five years since the last auction. There’s an industry willing to take risks.”
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