Page 16 - LatAmOil Week 23 2020

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IOCs call on Brazil to switch

from PSCs to concessions

SEVERAL of the international oil companies “It gives companies the wrong stimulus. Instead
(IOCs) operating in Brazil say the country needs of maximising efficiency, the aim is to inflate
to begin offering concession terms for its pre- costs to reduce taxation on profit.”
salt acreage and abandon the production-shar- Brazil began awarding PSCs for acreage in
ing contracts (PSCs) it is currently using. the pre-salt region back in 2010. At that time, it
One of the companies calling for change is assigned contracts to the bidders that offered to
Royal Dutch Shell, the second-largest producer share the highest percentage of profit oil – that
in Brazil after state-run oil and gas major Petro- is, the total oil produced minus costs – with the
bras. Andre Araujo, the president of the Anglo- federal government.
Dutch major’s Brazilian subsidiary, said that Castello Branco also criticised the state-
the South American state would have to make owned marketing firm Pré-Sal Petróleo SA
changes to draw investors back to its upstream (PPSA), which represented the federal govern-
bidding rounds. ment in consortia, for effectively determining
“A change in regimes doesn’t necessarily return on capital. This arrangement, he said, has
mean a return of investments. Concession con- also been a disincentive for investors.
tracts also have to be attractive,” he was quoted Brazilian Energy Minister Bento Albuquer-
as saying by Argus Media. que recently mentioned the possibility of a sim-
Brazil’s PSC model has come under criticism plified contract model. So far, though, he has not
before, but large firms such as Petrobras, Shell, voiced clear support for switching to the con-
BP (UK), Total (France) and Chevron (US) have cession model and dropping PSCs, which have
stepped up their calls for moving to a unified local tax advantages for the government.
concession model recently. One of the critics is The Brazilian government has been con-
Roberto Castello Branco, the CEO of Petrobras, cerned about attracting investors since last
who has said that Brazil’s sizeable reserves are no November, when it held its biggest-ever offshore
longer enough to attract investors. auction. The results were disappointing, as the
“The [production-sharing] regime is very only companies to submit offers were state-run
disadvantageous from an economic point of Petrobras and two government-run Chinese
view,” he was quoted by Argus Media as saying. firms. ™

Argentina to tender Vaca Muerta block

ARGENTINA is reportedly getting ready to of the block at the start of the year. It ultimately
launch a tender for a section of the Vaca Muerta opted to hold off, though, saying that conditions
formation known as Loma Amarilla Norte. were not favourable.
The government of Neuquén, the central Vaca Muerta is around the size of Belgium
Argentine province where much of the forma- and contains around 308 trillion cubic feet
tion is located, has said it is close to finalising (8.722 trillion cubic metres) of shale gas, accord-
details of the tender. Local officials have indi- ing to the US Energy Information Administra-
cated, though, that they will “wait for the right tion (EIA).
moment” to start the bidding process, according Foreign majors such as Royal Dutch Shell
to a report by local business daily El Constructor. (UK/Netherlands), Total (France), Exxon-
Loma Amarilla Norte covers an area of 217 Mobil (US), Chevron (US) and a subsidiary of
square km in the north-eastern corner of Vaca BP (UK) are among the companies seeking to
Muerta. It encompasses the northern half of develop sections of Vaca Muerta, which is one of
what was originally a larger block and is located the largest shale formations in the world.
near a number of shale gas fields – including Recent events have slowed the pace of efforts
Rincón de la Aranda and San Roque, operated to realise the formation’s potential. In April, YPF
by Total Austral and Pampa Energía respectively cut oil production at Loma Campana, its key
– that are considered promising. oil play in Vaca Muerta, because demand had
The southern half of Loma Amarilla was ten- fallen off during the lockdown imposed to try
dered and awarded to Argentina’s state-run oil to curb the spread of coronavirus (COVID-19).
and gas company YPF in 2019. According to Rio Negro, a local newspaper, the
The Neuquén provincial government said it company closed down half of its producing wells
was planning to make a sale of the northern half at the field. ™

P16 www. NEWSBASE .com Week 23 11•June•2020