Page 5 - LatAmOil Week 44 2019

LatAmOil COMMENTARY LatAmOil
 In the absence of competition, the sales gener- ated less in the way of signing bonuses than ANP had hoped. The agency had said previously that the transfer of rights auction would generate at least BRL106.5bn ($26.08bn) worth of signing bonuses for all four blocks.
Instead, Petrobras and its Chinese partners have now pledged to pay the minimum amount of BRL70bn ($17.14bn) for just two blocks. Most of this sum will be coming not from the bidders’ own coffers but from a settlement that the Brazilian government has already agreed to pay Petrobras for its previous investments in the areas encompassing the transfer of rights blocks.
Measured responses
Brazilian authorities have tempered their disap- pointment, at least in public.
Roberto Castello Branco, the CEO of Petro- bras, indicated after the auctions that he had been surprised by potential investors’ reluctance to participate but did not elaborate. “We thought there would be competition. There wasn’t, but it’s not my place to comment,” he remarked.
For his part, Bento Albuquerque, Brazil’s Minister of Mines and Energy, asserted that the government was “satisfied” with the outcome of the auctions and would offer up the Atapu and Sepia blocks in another licensing round next year. Likewise, several Brazilian government officials declared that the sales of Buzios and Itapu were sufficient to make the bidding round a success.
The reality is a bit less rosy. For one thing, Brazil’s government needs the money that it might have earned from the successful sale of Sepia and Atapu. For another, the pre-salt region plays a crucial role in Brasilia’s efforts to attract foreign investment and to increase domestic oil production.
High price
As such, IOCs’ reluctance to bid is not an encouraging development. But it is not neces- sarily surprising.
There were signs of trouble well before November 6. A number of IOCs – including heavyweights such as BP, ExxonMobil, Repsol and Total – said prior to the auctions that they did not intend to make any bids. They all cited concern about the high cost of the assets as a rea- son for hesitation.
Some industry observers have also specu-
lated that Petrobras’ past history of exploration
in the region may have discouraged some inves-
tors. They have pointed to the fact that the win-
ners of the transfer of rights auctions would have
been obligated to compensate the NOC for the “ work it had already carried out in this section of
the pre-salt region.
According to Stephen Greenlee, Exxon- Mobil’s president of exploration, these obliga- tions were a deterrent to investment, especially since the US super-major has already secured the rights to other blocks offshore Brazil. “The transfer of rights would be a big bite were we to participate in that,” he told Bloomberg in an interview last week. “It’s a great opportunity [but] very expensive, because you have to pay the bonus and the compensation payment back to Petrobras.”
Greenlee also said that ExxonMobil had decided to stay out of the transfer of rights auc- tions only after careful consideration. He said that the company had weighed the Brazilian licensing round against other prospects such as new LNG projects, unconventional hydrocar- bon fields in the US and deepwater opportuni- ties in other parts of the world.
“Whether or not we participate, it would be wrapped up in how we would see that oppor- tunity versus all the other investment options, because there are a lot of investment options out there right now. If you ask my counterparts in other companies, they would give you the same deal. It’s a very, very unique opportunity, but it has to fit in with everything else,” he told the agency during an interview in Rio de Janeiro, which he was visiting in order to attend an industry conference.™
THE government of Antigua and Barbuda recently announced that it would let citizens buy into the West Indies Oil Co. (WIOC), the oper- ator of a petroleum product storage and supply complex that also serves customers in Dominica and the eastern Caribbean region.
In late October, Prime Minister Gaston Browne and his cabinet approved a plan to reduce its equity stake in the WIOC from 51% to 41%. According to a government statement, the plan provides for the use of a crowd-funding
mechanism to offer shares in the company to the public.
Cabinet officials have not yet revealed which mechanism they will use to accomplish this goal. They have stressed, though, that they will take steps to ensure that the sale will benefit many people and not just a single investor.
“[The government] will sell off the 10% [stake] in the WIOC to Antiguans and Barbu- dans, utilising a crowd-funding mechanism,” the statement said.

ANTIGUA AND BARBUDA
Antigua and Barbuda will use crowd-funding mechanism to sell 10% of shares in WIOC
robras’ past history of exploration in the transfer of
rights area may have discouraged some investors
Pet
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