RIO DE JANIERO—After years of apprehension and uncertainties about the future of the oil and gas industry in Brazil, the country’s 14th licensing round on Sept. 27 gave the industry a reason to smile.

The round, which was seen as a test for the reestablishment of the industry in the country, raised $1.19 billion in signature bonuses, with ExxonMobil and Petrobras playing large roles. The majors accounted for 90% of the signature bonuses, acquiring 10 blocks in a consortium or alone.

The round also marked the comeback of ExxonMobil and Petrobras to the licensing arena after being away for almost a decade and featured the debut of other large companies such as CNOOC and the Australian Karoon.

Brazil’s oil regulator ANP offered 287 blocks during the bidding round, and 37 blocks were acquired for E&P of oil and gas. The low number was outshined by the pursuit of ultradeepwater blocks in the Campos Basin, Brazil’s most productive basin.

According to Brazil’s Minister Fernando Coelho Filho, the success of the auction reflects the new regulatory framework, which brings to the industry more business-oriented measures that can attract oil companies of different sizes.

Coelho Filho explained that ANP simplified some rules of the Brazilian concession regime. Those measures were the:

§ Adoption of a single exploration phase and an extension option due to technical reasons;

§ Removal of local content as a bidding criteria;

§ Distinct royalties for new frontier areas and mature basins of greater risks; and

§ Incentives to increase the participation of small- and medium-sized companies.

“We accepted the challenge of boosting the oil industry in Brazil in order to create jobs and income and bring investments. We talked and listened to the companies to put Brazil in the world map for oil investments,” Coelho Filho said. “Also, we welcomed all companies—foreigners and Brazilians. In fact, all the Brazilian government wants is to explore the country’s potential in a moment when Brazil's economy needs investments.”

For ANP Director General Décio Oddone, the round was beyond expectations. Days before, Oddone said he expected the round would raise $190 million. “The outcome was beyond the expectations, though we were aware of the potential and attractiveness of the areas,” he said during a press conference.

For the onshore areas, the German Eneva was the biggest winner, acquiring five onshore blocks in Parnaíba Basin, located in Brazil’s northeast region.

Santos Basin Disappoints, Campos Basin Shines

In total, 20 companies from eight countries participated in the bid round. Seventeen of them acquired blocks. Ten of the companies are Brazilian, and seven are from other countries. The signing of contracts is expected to occur until Jan. 31, 2018.

The total acquired area was 25,011 sq km. The blocks acquired are distributed in 16 sectors of eight sedimentary basins: Parnaíba, Potiguar, Santos, Recôncavo, Paraná, Espírito Santo, Sergipe-Alagoas and Campos.

Santos Basin, off Brazil’s southeast coast, was expected to attract great interest from the majors. Of the 287 blocks offered to auctioned, 76 were located there. Yet, Karoon Gas Australia Ltd. was the only company to acquire just one block: S-M-1537.

The ultradeep waters in the Campos Basin, on the other hand, were the object of desire for major oil companies. Although Petrobras and ExxonMobil won most of the blocks offered, other majors such as Royal Dutch Shell, Repsol, CNOOC, BP and Karoon also bid. In the end, the largest signature bonus was $711 million, offered for block C-M-346 by the consortium formed by Petrobras (50%, operator) and ExxonMobil Brasil (50%). Those majors eyed the blocks’ proximity to prolific presalt fields nearby.

“We have said that Petrobras will tend to choose more carefully the blocks to be acquired. Those blocks acquired by us were worth buying. And we are very happy with the partnership with Exxon, the world’s greatest oil company,” Petrobras CEO Pedro Parente said.

Some analysts believe that Petrobras-ExxonMobil partnership can be repeated in the upcoming presalt licensing rounds.

ExxonMobil, one of the few oil majors without a presalt presence in Brazil, announced in April its interest in becoming a partner of Petrobras in ultradeep waters.

The second presalt round will offer four areas with unitizable deposits (djacent to fields or prospects where reservoirs extend beyond the granted area). These areas are related to the Gato do Mato and Carcará discoveries and to Tartaruga Verde and Sapinhoá fields.

The third presalt round will offer four areas in the Campos and Santos basins in the presalt polygon, related to the prospects of Pau Brasil, Peroba, Alto de Cabo Frio-Oeste and Alto de Cabo Frio-Central. Both rounds are scheduled for Oct. 27.

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