January 19, 2017 / 6:13 PM / in a year

Exclusive: Brazil plans two subsalt auctions in 2017, another in 2018

BRASILIA (Reuters) - Brazil plans to hold two subsalt oil auctions in 2017, putting new exploration areas up for bidding in November for what should be the “most competitive” round of the year, Oil Secretary Marcio Felix said in an interview on Thursday.

A man works at the Cidade Angra dos Reis offshore platform at the Lula oil field, about 300 km (186.4 miles) from the coast of Rio de Janeiro, February 16, 2011. REUTERS/Sergio Moraes

The auctions, an effort to lure foreign investment in a sector that for much of the past decade has been the object of protectionist policies in Brazil, will be the first since 2013 for the offshore region known as the subsalt, where giant discoveries were made starting about a decade ago.

The first auction, expected in the first half of this year, will offer areas next to existing discoveries already in development, Felix said. The November auction will be for fresh exploration areas and should generate more government revenue than the first, though the exact areas have not been decided yet.

The auctions will be the first since Brazilian state-run oil company Petrobras was freed from having to be the operator for all new projects in the subsalt.

Besides Petrobras, the opportunity to buy into new areas in one of the world’s most exciting deep-sea oil areas should attract offshore majors such as Anglo-Dutch Shell, France’s Total, and Norway’s Statoil, Felix said.

Shell said in a statement that it was studying whether to participate in this year’s oil auctions, adding that the terms would be an important factor. Total and Statoil did not immediately respond to a request for comment.

Reduced investments by companies hampered by low oil prices should not be a problem, Felix said, describing the subsalt as the Olympics of offshore exploration. “If you’re an athlete you’re not going to miss the Olympics,” he said.

Before plans of the second subsalt auction were confirmed, Brazil estimated it would generate up to 4.5 billion reais ($1.41 billion) this year from the first subsalt auction and two other auctions for more marginal and mature onshore and offshore areas.

The two subsalt auctions in 2017 represent a major shift in Brazil’s oil politics. With the country in its worst recession on record, the center-right government hopes to attract foreign investment and reinvigorate oil exploration in a region long stifled by nationalist energy policies and the financial woes of Petrobras.

Felix said Brazil would hold three oil auctions in 2018, including a subsalt one. To give companies greater long-term clarity, he said he expected to release a calendar by year-end outlining oil auctions for the next five years.

Local content rules should be simplified by the time auctions are held in 2018, Felix said, adding that new rules would be based on “incentives and not punishments.”

One potential change under consideration is to allow companies to gain credits for exporting oil equipment from Brazil or from investing in factories in Brazil. Such credits, Felix said, could be used to offset purchases of equipment from overseas.

Reporting by Leonardo Goy and Stephen Eisenhammer,; Editing by Lisa Von Ahn and Richard Chang

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