UPDATE 5-Brazil lures record bids at 1st oil, gas auction in 5 yrs
* Sale succeeds despite govt intervention, growing supply
* OGX, BG, Total, Galp stand out among winning bidders
* High demand, quick sales enabled auction to close early
* Areas offered believed to hold at least 35 bln barrels
By Jeb Blount and Sabrina Lorenzi
RIO DE JANEIRO, May 14 (Reuters) - Brazil's first auction for oil and gas rights in five years raised a record 2.82 billion reais ($1.4 billion) on Tuesday, alleviating fears that government intervention and growth in new global supplies might crimp enthusiasm for the country's oil sector.
The auction, which had been scheduled to take two days, drew such interest that regulators accepted bids apace, moving quickly through the blocks on offer and wrapping up the sale by late Tuesday afternoon. Bidders offered a total amount that broke a record 2.1 billion reais set at an auction in 2007.
Offers for the most sought-after blocks were as much as 40 times the minimum values set for the sale. In addition to payments pledged for the rights themselves, bidders also committed to investments in the fields of about 7 billion reais.
OGX Petroleo e Gas SA, the struggling oil startup controlled by Brazilian billionaire Eike Batista, was among the most aggressive bidders. Companies including Britain's BG Group Plc, France's Total SA and Portugal's Galp Energia SGPS SA also scored multiple blocks.
The auction comes one day after Brazil's state-run energy company Petroleo Brasileiro SA, or Petrobras, sold $11 billion worth of global debt despite heavy criticism from investors in recent years because of missed production targets and sagging profits.
Demand for the bonds, coupled with the strong showing at Tuesday's auction, indicate investors remain eager to be in Brazil, even after the government rewrote industry regulations to gain greater control over new concessions following discoveries of massive new offshore reserves in 2007.
"Companies would really like to expand their role in the country, including ourselves," said Thore Kristiansen, president of the Brazil unit of Norway's Statoil ASA, one of the participants. The strong showing, he added, reflects "pent up demand."
After an anxious lead-up to the auction, Brazil's government expressed joy over the soaring bids. "We never saw anything like this," Marco Antonio Martins Almeida, Brazil's oil secretary, said in an interview.
The auction kicked off with the sale of onshore blocks in the northeastern Parnaiba basin, followed by offshore blocks in the Foz do Amazonas basin, near the mouth of the Amazon river, and in the Barreirinhas basin further south.
Petrobras, Galp and OGX won early onshore blocks. OGX, which has lost nearly 90 percent of its market value since the company failed to meet initial production targets, secured rights to at least 13 blocks, onshore and off, through bids totaling about 375 million reais.
Total and Britain's BP Group Plc were among the successful bidders for the offshore Amazon blocks, located just south of a major 2012 oil discovery off the coast of French Guyana. Other successful bidders included Statoil, Chevron Corp. , Exxon Mobil Corp and Australia's BHP Billiton Plc, until now not a big player in Brazilian oil.
On offer were rights to 289 onshore and offshore exploration and production blocks that add up to an area roughly the size of Bangladesh, or about 150,000 square kilometers (60,000 square miles).
The blocks, in regions outside the offshore swath near Rio de Janeiro where the big recent reserves were discovered, are estimated to contain at least 35 billion barrels of oil, or just over a year's worth of global crude oil demand.
A CHANGED LANDSCAPE
Though the auction drew a record number of participants, government officials, industry suppliers and others were unsure before the sale how much the 64 Brazilian and international companies that registered would bet.
Officials were eager to know whether interest would remain strong among major multinational energy companies or whether smaller, adventuresome investors would prove more willing than bigger competitors.
Doubts ahead of the auction reflected an energy landscape far different from the last time oil and gas rights were sold in Brazil. World supplies look more plentiful now, thanks to a shale-oil boom in the United States and success at extracting once hard-to-reach oil in Canada, Venezuela and elsewhere.
Brazil's production has fallen in recent years as the government halted sales of new blocks and reworked its rules, upending a regulatory model that had been popular with foreign investors. Since huge reserves near Rio were discovered, the government has sought more control over future concessions, and a greater share of oil produced in the subsalt region, home of the big new discoveries.
'THE SIZE OF THE PRIZE'
Still, the potential for profit motivated bidders, many of whom operate in countries far less investor-friendly than Brazil. In addition to any upside offered by the blocks sold Tuesday, many investors were eager to gain or increase exposure to a country that could still boast vast undiscovered reserves.
"The size of the prize in the country is really too big for companies to ignore," said Ruaraidh Montgomery, a Latin America analyst for energy consultancy Wood Mackenzie. "The opportunity's just too great."
In all, rights to 140 of the blocks on offer were sold.
Oil companies were selective. Bidding was fierce for the offshore Amazon blocks in promising deepwater fields, but only two companies made bids for three of 26 blocks offered in shallow water closer to shore in the same basin.
Brazilian companies took part despite production delays and sluggish development of new fields.
Most of the blocks auctioned are in frontier regions, or underexplored areas with little or no existing output.
The blocks, mostly in north and northeast Brazil, were split into four onshore and seven offshore zones across 11 sedimentary basins.
In November, Brazil plans to sell blocks in what it has dubbed the "subsalt polygon," which includes Lula, the big field discovered in 2007, and other major nearby finds. The term subsalt is used to denote the deep beds, beneath layers of salt under the ocean floor, where the big recent discoveries lie.
But the polygon also includes much oil, including that currently produced in the well-known Campos and Santos basins, that does not lie in subsalt reservoirs. Campos and Santos together account for more than 80 percent of Brazil's existing production.
- Exclusive: Secret contract tied NSA and security industry pioneer |
- U.S. aircraft hit by gunfire in South Sudan as conflict worsens
- With Fed out of the way, what's next on Wall Street?
- Four men arrested in deadly N.J. shopping mall carjacking
- Analysis: Lost Brazil order raises threat to Boeing fighter jets