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RIO DE JANEIRO — A strange-bedfellows consortium of Chinese and European firms bought the rights to exploit Brazil’s biggest-yet oil discovery with the national oil company, in a highly anticipated auction that fell flat and exposed international misgivings about the government’s management of the energy sector.
Anglo-Dutch energy giant Royal Dutch Shell PLC and France’s Total SA each bought 20 per cent of the consortium to develop the huge Libra offshore oil find, while China National Petroleum Co. and China National Offshore Oil Corp. each took 10 per cent. Brazil’s national oil producer Petrobras added 10 per cent to its 30 per cent mandatory share.
Only 11 foreign companies signed up to bid, far fewer than the 40 that Brazil’s oil agency had originally expected, and in the end only these four were part of the sole offer.
The poor turnout signalled international concerns about the government of Brazil’s heavy role in Libra, and may be seen a setback for the country’s vision for the project to kick-start its flagging economy and provide widespread social benefits to its citizens.
“The government will call it a victory because they get a 15 billion reais (about $6.7-billion U.S.) signing bonus, the biggest one ever paid,” said Fernando Barbosa, an economist monitoring the auction for a Rio de Janeiro think tank called the Getulio Vargas Foundation. “But we lost an opportunity.” The lack of many international players cost the country both potentially higher profit pledges and access to technology, he said.
“The federal government was the big loser, because it got the minimum share,” said Adriano Pires, president of the Brazilian Centre for Infrastructure, which consults on the energy market. Law mandates that a minimum 41.65 per cent of “profit oil” (earned after investments are repaid) go to the government, and that’s exactly what the consortium promised. “It couldn’t even get 1 per cent more.”
The government had initially predicted it might get as much as 75 per cent of the profit oil, expecting competition among firms and consortia would drive up bids.
The sale of rights to Libra, one of a spate of finds made in 2007 in the Santos Basin off Brazil’s southeastern coast was the first under a three-year-old legal framework that mandates greater state involvement than the previous concession model.
The Libra field is in Brazil’s richest oil region, the “pre-salt” reserves that hold billions of barrels of oil under a thick layer of salt beneath the rock of the ocean floor. Under the new law, Brazil’s state-run oil company Petrobras must lead development of Libra. “The rules of the game kept prices down – that you have to invest a lot of money and you don’t have control of that money,” Mr. Barbosa said.
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