A Brazilian auction of rights to develop additional oil-producing areas in the country’s so-called transfer-of-rights region is unlikely this year, Brazil’s Deputy Mining and Energy Minister Marcio Felix said on Aug. 21.

The government in 2010 transferred to state-run oil company Petróleo Brasileiro SA, known as Petrobras (NYSE: PBR), rights to extract 5 billion barrels of oil and gas in the offshore Santos Basin, at a value based on oil prices at the time. The volumes are now estimated to be much larger, and the cash-strapped government wants to sell the rights to extract the extra oil.

The choice reserves cannot be auctioned off until the government and Petrobras reach a deal over the disputed value of the area. Brazil’s Senate also has to approve legislation already passed the lower house, allowing Petrobras to cede up to a 70% stake of the area to other oil companies.

While hopes were high for a deal and an auction this year, prospects are dimming, said Deputy Mining and Energy Minister Marcio Felix, at an event in Rio de Janeiro ahead of hotly contested presidential elections in October.

“It would be hard [to do it in 2018], but we haven’t thrown in the towel yet,” he said, adding that if the legislation is not approved by Sept. 15, an auction cannot happen this year.

The 2010 contract stipulated that costs, among other things, would be reviewed after the area was declared commercially viable in 2014. That has led to years of sparring, as oil prices have fluctuated, with both parties claiming to be owed billions of dollars.

Resolving the spat would let the cash-strapped government raise extra revenue to close a huge budget gap by selling the rights to billions of barrels of oil.

The area lies in Brazil’s pre-salt region, where billions of barrels of oil are buried under thousands of feet of salt beneath the ocean floor.

State Waters