Brazil to auction off oil blocks
September 20, 2012
Mines and Energy Minister Edison Lobao announced that Brazil is planning to auction off new oil and gas blocks for exploration and production May 2013, this will be the first oil exploration rights action in more than five years, according to Fox News.
Lobao said they have about 174 new blocks, half of which are offshore and the other half onshore, that will be up for auction called the 11th round.
There will also be an auction planned for November 2013, when companies will compete for the rights to drill in the ultra deep "pre-salt" regions, which was discovered a few years ago. It was given its name because it is located far below the ocean floor and under a shifting layer of salt. However, below this is tens of billions of barrels of crude oil. This can greatly change Brazil's role and make it a major oil exporter.
According to Reuters, Congress is still able to delay these auctions even more due to royalties, which have already been held up for two years.
As of right now, the majority of oil production revenue will go to the oil-producing cities - Rio de Janeiro, Sao Paulo and Espirito Santo. However, the remaining 23 believe the revenue should be spaced out evenly, and this was recently approved by the Senate, but not Congress.
"Great, they've said they're going to have an auction. All they need to do is solve the most difficult part first, the political part, the royalties," Cleveland Jones, a geologist with the National Petroleum Institute at the State University of Rio de Janeiro, told the news source.
However, it is believed that a deal may be close and many think the May auctions will go off without any extra delays.
"I think we should look at this positively," Joao Carlos de Luca, president of the IBP, Brazil's petroleum industry association and president of oil company Barra Energia, told the media outlet. "The government has committed to a date and I think they will find it hard not to deliver on that."
The auction is expecting to produce $1 billion for the Brazilian government, the news outlet reports.