Brazil to Perform Initial Oil Exploration Bid

Brazil will perform its initial bid of pre-salt oil exploration acreage under the nation’s new regime of production sharing in October, a month earlier than anticipated.

The National Energy Policy Council (CNPE) of Brazil made an announcement of the decision during the recent Federal Register. The Libra prospect will be the first region set for auction. The prospect is estimated to hold a maximum of 16 billion barrels of recoverable oil according to local regulators. The National Petroleum Agency (ANP) of Brazil initially said that the bidding will happen in November.

The pre-salt bidding will occur after the nation’s recently successful sale of oil and gas exploration concessions which raised around 2.8 billion Brazilin reals, or $1.4 billion U.S. dollars, in signing bonuses. The auction’s acreage, the first of Brazil in almost five years, was sold under concession deals that provide oil firms control over exploration and development in exchange for royalties from natural gas and crude oil production.

The new regime of production sharing makes Petrobas, the country’s state-run energy firm, the operator of the pre-salt regions and gives them a stake of at least 30 percent. Auction winners will be based on the quantity of oil profit or crude produced, minus development costs, that firms consent to give to the government of Brazil.

The major pre-salt oil areas are in the Santos Basin, which is off-coast of the states of Sao Paulo and Rio de Janeiro. The formations are located below 2,000 meters of water and more than 5,000 meters of sand, salt and rocks.