Brazilian Oil Auction Flopped as Bidders Stayed Away
Brazilian oil auction deposits tumbled, sending the real flopping after state-controlled Petroleo Brasileiro SA did most of the bidding. Other major oil firms stayed away from the bidding.
Petrobras joined with China’s Cnooc Ltd. in submitting the winning bid for the giant Buzios field, the price of the auction. Also, Petrobras was the only bidder for the Itaipu block and offered minimum amounts for both. Sepia and Atapu did not receive bids while Exxon Mobile Corp and other firms did not make any.
The Brazilian real dropped against the dollar as a result of diminished anticipations for how much of the U.S. currency will surge into the country. Also, Petrobras shares declined more than 5%, meaning it needs to spend more than initially expected to improve the block.
The auction was to be part of Brazil’s shift away from patriotic oil policies. Also, it will be to help it shake off some of the hardest years in the country’s history. This is after a devastating recession followed a wide-ranging corruption probe in 2015 and 2016. With the economy still grappling with growing, Brazil was looking to the sale to put some badly needed cash into public offers.
The areas being auctioned expected to increase about $25 billion in government fees with estimated total reserves of billion barrels of oil. Also, they waited for another $25 billion in repayment for Petrobras, which already invested in drilling and platforms.
Contrarily, the multibillion-dollar offering came at a time when oil producers are rising pressure from investors to show capital discipline. Also, their stocks have been dropping since crude prices stumbled in late April.
Oil majors have been stricter in using capital after the days of oil at $100 a barrel. They are no longer looking to broaden proven reserves at any cost.
Brazilian Oil Auction and the Buzios Block
Brazilian officials said the 70 billion reais in licensing fees from the two auction blocks are still the largest collected by a government. Contrarily, the compensation to Petrobras dropped to a fraction of $25 since its allies in Buzios holds a 10% stake in the venture.
The auction was still a big event for Brazil. Energy Minister said it is a success and that Brazil is on the right path. He added the country would offer the two fields that went unsold again next year.
The oil majors who stayed back could be waiting for another pre-salt oil auction in Brazil. Five exploration blocks purchased with cheaper signing bonuses since the areas involve exploration risk, with crude yet to be hit.
The Buzios block alone serves as one of the largest reserves of delivered crude to purchase since Iraq opened. Despite the block’s size, Exxon Mobil Corp.’s president, it was costly.
Moreover, Petrobras altered at 4:48 PM in Sao Paulo after lowering as 50.2% after announcing the result of the auction.
The head of Latin America upstream research said it would add extra pressure to cash flows. They will spend $7 billion above the $9 billion they got from the government since they aren’t dividing future costs with more allies. Also, Petrobras received the $9 billion for settling the original Transfer of Rights contract.
