Brazil's oil regulator says 2014 concession auction unlikely
* ANP concerned there may not be enough good areas to sell
By Jeb Blount
RIO DE JANEIRO Oct 17 (Reuters) - The head of Brazil's oil regulator said on Thursday that her agency is unlikely to recommend an auction of oil exploration concessions in 2014, raising doubts of a revival of an annual auction cycle after a five-year hiatus.
"I'm not so concerned about having annual auctions as I am about having good areas to sell," Magda Chambriard told reporters in Rio de Janeiro. "Right now I think it unlikely that we will recommend an auction next year."
On May 15, Brazil raised about $1.4 billion at its first oil rights concession auction since 2008. From 1999 to 2008 Brazil held annual auctions for on-shore and offshore areas.
Many investors and experts consider annual auctions essential to the long-term health of the Brazilian oil industry, allowing companies to plan while knowing they have or can buy new projects to replace any old or diminished field.
During the 1999-2008 period Brazil experienced rapid oil output growth that transformed the economy from one dependent on imports into a net exporter of crude. Oil output rose, on average, more than 5 percent a year in the period.
Brazil ended its annual auction system after a series of giant offshore discoveries south of Rio de Janeiro known as the "subsalt" starting in 2007. Subsalt refers to oil strikes made under a layer of salt deep beneath the seabed.
The auctions were canceled to allow the government time to draft and pass a law that boosted government control over those new discoveries and adjacent areas.
Since then, output has faltered, growing an average of 2.35 percent a year. Output even fell 5.3 percent in 2012.
The first auction under that new framework is scheduled for Monday. Chambriard, who has headed the regulator known as ANP since last year, has billed the sale of the Libra area, which contains an estimated 8 billion to 12 billion barrels of oil, as the largest offshore oil prospect ever sold.
If the projection holds up, Libra could nearly double Brazil's oil reserves and would contain enough oil to cover world crude demand for as much as 19 weeks.
Chambriard said Thursday that she expects production to peak in Libra at about 1.4 million barrels a day in a decade, though some in the government suggested that production could rise to more than 2 million barrels a day.
That auction will be for a production-sharing contract, an accord that will go the company or group that offers Brazil the largest share of "profit oil," or oil produced after investment costs are recouped, to sell on its own account.
State-run Petroleo Brasileiro SA, or Petrobras, will have to lead any winning group as operator of Libra and take on a minimum 30 percent ownership and investment stake.
Chambriard said it was also unlikely that a new production-sharing auction would be held next year as the oil prospects in the area covered by the new framework are too large and require too much investment to be tendered on an annual basis.
The concession system gives exploration and production rights to the highest bidder, Brazilian or foreign, in exchange for an exploration commitment, an agreement to buy a minimum of related goods and services in Brazil- usually more than half - and the payment of a royalty. All oil produced is owned by the concession holder and can be sold wherever the owner wishes.
This system still applies to all areas outside the Subsalt Polygon, an area that comprises most of the Campo and Santos offshore basins south and northeast of Rio de Janeiro, already home to more than 80 percent of Brazilian output. Those basins are also where the main subsalt finds were made.
All future development in the Subsalt Polygon will be done under production sharing contracts.
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