* 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 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
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
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
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
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