Brazil oil auction raisesa 'disappointing' $17bn

Brazil had high hopes for its large oil auction. They were bust

Brazil had high hopes for its large oil auction. They were bust

Marcio Felix, Brazil's former oil and gas secretary and a key architect of the auction, said the government may need to reduce the signing bonuses in those fields.

The highly-anticipated auction - Brazil's biggest ever - comes after President Jair Bolsonaro's recent push in Saudi Arabia for the Latin American country to be included in the Opec oil producing cartel.

Petroleo Brasileiro SA, as the Brazilian firm is also known, and Chinese state firms CNOOC and CNODC made the only bids out of over a dozen major oil firms who had registered.

But Fernanda Delgado, research coordinator at the Fundação Getúlio Vargas University that studies the oil industry, said Brazil is an attractive market for investors at a time when USA sanctions are paralyzing two other oil giants, Iran and Venezuela.

It ranked ninth in 2018, according to the US Energy Information Administration.

Petrobras was the sole participant and de facto victor 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 Sepia and Atapu fields did not receive any offers.

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Brazil's oil sector has been recovering from the fall in global 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.

Petrobras had already committed to bidding on those two blocks and operating them, paying the signing fees with the funds from a settlement with the government related to the so-called "transfer-of-rights" (TOR) area.

Petrobras shares erased early gains made on hopes of attracting more foreign partners.

Officials said the results were satisfactory, yet some acknowledged that giving Petrobras preferential rights in Brazil's most promising offshore areas was bad for competition, suggesting the government wants to scrap that legal requirement.

Signing fees of approximately $17 billion for the two blocks will go to the government of Brazil. Most of that was for the Buzios field, which is Brazil's second largest in terms of output, with 424,000 barrels per day.

Pre-salt deposits account for more than 60 percent of Brazil's oil production.

Environmental activists held a protest outside the luxury hotel in Rio where the auction was being held, demanding "ocean without oil".

The sale comes as Brazil battles to clean up a massive oil spill, which has affected hundreds of beaches along more than 2,000 kilometers (1,250 miles) of Atlantic coastline.

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