RIO DE JANEIRO – Brazil awarded two of the four blocks on offer in its priciest oil auction since 2010 on Wednesday, securing about $17 billion dollars but falling short of government expectations.
The highly anticipated tender had captured the attention of some of the world's biggest oil firms, including the United States' ExxonMobil and other companies from China, Malaysia and Norway.
In the end, few participated. Chinese state-owned oil firms CNOOC and CNODC won the largest block, Buzios, in a consortium with Brazil's state-controlled Petrobras. The Chinese will have a minority share of 10 percent in the joint venture.
Petrobras was the sole participant and de facto winner of the second awarded block, Itapu.
"We have to evaluate why the big (oil firms) didn't participate in this auction," said Brazil's energy minister, Bento Albuquerque, adding that the government will review the auction's methodology to improve future tenders.
The contract terms stipulated that winning bidders were to reimburse an undisclosed amount of money to Petrobras to compensate for exploratory works already carried out by the company. The fact that this sum was to be negotiated after the auction represented additional risk for potential investors.
Brazilian energy officials after the event maintained the auction was a success, though the proceeds fell short of the $26 billion the government could have obtained if all four blocks had been auctioned.
Décio Oddone, director of Brazil's National Agency of Petroleum, Natural Gas and Biofuels called it a "historic day" for the oil sector.
The tender is the result of years of difficult negotiations between the federal government, Petrobras, which had previous rights on the oil fields, and Brazilian states that also wanted a share of the windfall.
Brazil's oil sector has been recovering from the fall in international oil prices since 2014 as well as the sprawling "Car Wash" anti-graft probe that unveiled endemic corruption at the top levels of Petrobras and the government.
"We had a crisis here in Brazil," Oddone said in an interview with The Associated Press before the tender. "The oil sector hit the wall. We had to do something for the market to recover."
According to Fernanda Delgado, head of research at the Getulio Vargas Foundation*s energy department, Brazil is now considered a "hot spot" for oil investment, for its attractive geology, contract terms, and stable political context.
"At this time, I think 70 billion reals ($17 billion dollars) is a very significant amount of money for the public coffers," Delgado said.
Brazil's economy remains sluggish after emerging from a two-year recession in 2017, and fiscal constraints have imposed limits on public spending. The auction's proceeds will be distributed between Petrobras, the federal government, as well as states and municipalities.
The four blocks, off the coast of Rio de Janeiro, hold reserves of up to 15 billion barrels of oil. The unawarded blocks are likely to be offered in future auctions, officials said.