Petrobas Opts for Selective Oil Investment in Brazil Round

Many are skeptical about Petrobas’ capacity to invest in oil exploration in Brazil, which is set to auction offshore oil fields this coming May. The state-run oil company has significantly large liabilities, leaving the company with limited funds for the forthcoming bidding rounds. Petrobas is neck-deep in debt as it spent more than $90 billion of borrowed funds for deepwater oil exploration during the past few years. It also needs to fund infrastructure projects already in the pipeline.

Observers say that Petrobas’ financial constraints are a big boost for Exxon Mobil, which is reportedly intent on acquiring new oil assets from the Latin America region.

After a 6-year hiatus, Brazil is back to auctioning off its offshore oil assets and expects to rake in up to $5 billion worth of sales.  A specialist from Medley Global Advisers noted that this is Brazil’s biggest oil sale for 2013 and presents huge opportunities for global oil companies to gain additional acreage.

However, Petrobas reportedly said that it might still submit bids, but only for a select few, particularly focusing on existing oil fields. Some believe that the company might forego oil assets that haven’t been explored in view of its limited funds.

Exxon, on the other hand, didn’t issue any word about its participation in the May 2013 Brazilian auction.  Shell, meanwhile, disclosed that it will review all assets being offered for sale.

Close to 290 oil blocks will be opened for sale. Brazil confirmed that these could hold about 36 billion barrels of oil equivalent (boe).

Aside from Exxon and Shell, other bid participants may include BP, Repsol, and China Petroleum.  A total of 71 oil firms have signified their intention to place their bids for the Round 11 auction.

Petrobas’ exploration and production head, Jose Formigli, mentioned that the company’s strategy is based on selective investing and forging partnerships with other oil companies. He believes that companies engaged in the oil investment and exploration business benefit well from conducting these, particularly under joint-venture or partnership-type arrangements.

While Brazil is definitely a hot spot for oil explorers, observers say that protocols requiring the use of local resources, employees and service providers could dampen global interest in the Round 11 auction.  Such a policy is clearly a tactic employed by the country to boost local employment and economic development.

By: Chris Termeer

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

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