OGX Snaps Up First Blocks In Brazil Oil E&P Auction
Published November 27th, 2007
OGX, the oil exploration unit of Brazilian holding company EBX, won most of the first high-potential oil and natural gas blocks in a Brazilian government auction Tuesday of exploratory blocks.
OGX paid more than 800 million Brazilian reals ($430 million) for stakes in seven blocks in Brazil’s prolific Campos Basin. In five of the blocks, OGX will have a 100% stake, including the C-M-466 and the C-M-592 blocks for which it paid BRL237 million each. The blocks were the most expensive auctioned so far.
EBX is the holding firm of Brazilian businessman Eike Batista, and controls the investor’s mining, petroleum and energy interests.
Brazil’s National Petroleum Agency, or ANP, said it sold the blocks in the Campos Basin for BRL959 million. The blocks in the Campos Basin lie close to the Polvo and Papa Terra fields. Devon Energy Corp. (DVN) in July started output at Polvo, which is expected to peak at 50,000 barrels a day in late 2008. Petrobras plans to start production at Papa-Terra, which has estimated oil reserves of 700 million barrels, in 2010.
The auction, which will run Tuesday and Wednesday, will offer a total of 271 blocks in five offshore and five onshore basins. Of those, 111 are offshore blocks considered to have a “high potential” to hit oil or natural gas, the ANP has said.
In 1997, Brazil opened exploration of its oil reserves to private operators, and since has held eight licensing rounds.
The government earlier this month cut 41 of the most promising blocks from the auction, claiming a sovereign interest in the area.
Just before the withdrawal, Brazilian state-run oil company Petroleo Brasileiro SA (PBR), or Petrobras, announced a massive find: its ultra-deep Tupi field could contain up to 8 billion barrels of oil equivalent in reserves. The blocks cut from the auction lie near Tupi, or in similar geographical conditions in Brazil’s pre-salt area off the coast in the Atlantic Ocean.
Some oil companies have complained about the last-minute withdrawal, but none of the 66 firms qualified for the licensing round - among them oil majors such as Chevron (CVX) and ExxonMobil (XOM) - pulled out of the auction.
State-oil firms such as ONGC Videsh Ltd., the overseas investment arm of India’s state-owned Oil & Natural Gas Corp. (500312.BY), have also qualified to participate, as have mining giants Cia. Vale do Rio Doce SA (RIO) and rival BHP Billiton Ltd. (BHP), via its BHP Billiton Petroleum Inc. unit.
The downsizing of this year’s auction increased concerns about regulatory instability, Brazil industry trade group Petroleum Institute said - especially after last year’s round had been aborted after half a day by a court injunction.
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