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in the Santos basin offshore Brazil as part of the country’s latest bid round. (ANP).
Jeff Flick, Platts
RIO
EnergiesNet.com 04 14 2022
The third cycle of Brazil’s Open Acreage program registered heated competition for onshore and offshore blocks, generating record-setting signing bonuses that cemented use of the new sales model as the primary form for licensing exploration and production concessions across Latin America’s biggest producer, officials said April 13.
Brazil sold 59 onshore and offshore blocks, raising about $90.4 million in signing bonuses, according to final results from the National Petroleum Agency. The ANP estimated minimum work guarantees will generate about $87 million in investments, primarily in seismic surveys and onshore drilling campaigns.
The sale got off to a unexpected and rousing start, with Shell partnering with Colombia’s Ecopetrol in a head-to-head battle with TotalEnergies for six blocks in the offshore Santos Basin. The blocks were located in the southern portion of the basin in an area considered more prospective for gas, which fits with the companies’ focus on development of assets linked to the global energy transition.
Shell will hold a 70% operating stake and Ecopetrol will own a 30% minority share in the Santos Basin’s S-M-1599, S-M-1601, S-M-1713 and S-M-1817 blocks. TotalEnergies, meanwhile, snapped up 100% of the S-M-1711 and S-M-1815 blocks, paying the auction’s highest signing bonuses at $32.1 million and $26.8 million, respectively.
In addition, Shell and Ecopetrol teamed to buy the S-M-1908 and S-M-1910 blocks without any rival offers.
The purchases consolidated a strong portfolio of exploration assets for Shell and Ecopetrol in the southern Santos Basin, where the companies also snapped up acreage during Brazil’s 17th bid round held in October 2021. In last year’s largely disappointing sale, Shell purchased 100% stakes in the S-M-1707, S-M-1715, S-M-1717 and S-M-1719 blocks. Shell and Ecopetrol also teamed to buy the S-M-1709 block.
The offshore Pelotas Basin, meanwhile, once again failed to generate any offers despite a declaration of interest in the area. Blocks in the basin were included in previous bid rounds, but interest in the frontier region has been mild due to a lack of drilling activity and questions about environmental licensing.
Rafael Bastos, secretary for oil and gas at the Mines and Energy Ministry, noted that the basin’s inclusion in the bid session demonstrated growing interest despite the lack of an offer.
“The market is paying attention,” Bastos said. “And exploration in our counterpart off the coast of Africa will bring new information about the basin to Brazil.”
Onshore competition, too
The remaining 51 blocks sold during the Open Acreage program’s third cycle were onshore, where 11 companies competed to build out existing portfolios amid a rebirth in Brazil’s onshore industry. Onshore oil and natural gas output is trending higher after state-led oil company Petrobras, which sat out the bidding, sold off legacy onshore fields to companies focused on revitalizing the mature producers.
The ANP expects the 124 fields sold by Petrobras to more than double production to about 125,000 b/d by 2025. Production in the areas fell 60% in the 2012-2020 period, according to the regulator.
Origem Energia paid about $495,000 to snap up 100% stakes in 18 blocks spread across the Sergipe-Alagoas and Tucano Sul onshore basins, where the company already owns assets. The company had an offer in the Reconcavo Basin invalidated because it hadn’t declared interest in the areas up for sale, which is required under the Open Acreage tender rules.
Petro-Victory Energy also dramatically beefed up its onshore exploration portfolio in Brazil, where the company already held 19 licenses in the Barreirinhas and Potiguar basins. Petro-Victory paid about $228,000 for 100% stakes in 19 blocks in the onshore Potiguar Basin, including several bids that topped rival offers from active newcomer 3R Petroleum.
3R Petroleum, meanwhile, paid about $214,000 for 100% stakes in six blocks in the Potiguar Basin, where the company also already has operations. That included the top bid for an onshore block at $150,000 for the POT-T-437 block.
Mines and Energy Minister Bento Albuquerque lauded the record-setting signing bonuses, which he said supported the government’s strategic shift to the new sales model.
“More important than the success of this auction, is the consolidation of the use of Open Acreage sales,” Albuquerque said, noting that 14 companies submitted bids. “Today’s auction shows that this public policy was correct.”
The next step for the Open Acreage program is to extend its use to important blocks in the subsalt region, officials said. Brazil is in the process of including 11 subsalt blocks that went unsold at previous production sharing sales or were scheduled to be sold at future bid rounds in an Open Acreage Production Sharing program. The Mines and Energy Ministry and ANP expect the first production sharing version of the Open Acreage program to be held in 2022, likely closer to the end of the year.
spglobal.com 04 13 2022
