RIO DE JANEIRO--BG Brasil, the local unit of BG Group PLC
(BG.LN), won 10 of the 12 offshore oil and natural gas exploration
blocks the company bid for in a hotly contested auction, leaving BG
"satisfied" with its performance, BG Brasil President Nelson Silva
said Tuesday.
BG paid about $200 million in signing bonuses and committed to
investments of about $700 million to drill seven wells in the
Barreirinhas Basin, an area along Brazil's northern coastline that
is part of the country's equatorial margin, Mr. Silva said. The
equatorial margin generated intense bidding in Brazil's 11th round
auction of 289 oil and natural gas exploration concessions, the
country's first in five years.
Oil companies were attracted to the area, hoping that recent
discoveries off the coast of West Africa and French Guiana would
translate to Brazil's coast. "Participants are looking at the
discoveries made in other areas of the world for geologic
similarities," Mr. Silva said.
BG went solo in bids for six offshore blocks, holding a 100%
stake in the concessions. In the four remaining blocks, BG teamed
with Brazil's Petroleo Brasileiro (PBR, PETR4.BR) and Portugal's
Galp Energia (GALP.LB). BG will operate the blocks with a 50%
stake, while Petrobras will take 40% and Galp 10%. The companies
hope to repeat their successful partnership in the BM-S-11 block,
where the companies found oil buried deep under a thick layer of
salt in an area known as the presalt.
"We're very happy to be together with them in Barreirinhas now,
and having BG as the operator shows the level of confidence between
the partners," Mr. Silva said.
In the winning bids, BG pledged to use 39% locally produced
goods and services during the exploration phase and 65% during the
development phase. Magda Chambriard, president of Brazil's National
Petroleum Agency, or ANP, said oil companies were keeping local
content commitments at the minimum level required to bid, taking a
"cautious" approach toward pledges to use local goods and
services.
BG made "very careful" calculations to determine its local
content commitments, Mr. Silva said. "We want to promise
percentages that we can deliver," Mr. Silva said. "We're confident
that we can deliver these numbers."
Brazil wants to use the local content rules to foment the
country's oilfield services industry, creating jobs in Latin
America's largest country. The fresh round of bidding is expected
to generate a surge in activity across Brazil's oil industry, which
was running out of areas to explore in the absence of concession
auctions. Oil companies had warned that exploration could dry up as
soon as 2015 without new sales of exploration acreage.
The auction is the first of several sales of exploration acreage
set to take place in Brazil this year, including the first sale of
subsalt exploration acreage under new production-sharing
agreements.
Billions of barrels of oil have been discovered in the subsalt
region, where oil and natural gas were found trapped deep beneath
the ocean floor under a thick layer of salt. Unconventional oil and
natural gas concessions, the same type of shale and tight gas
acreage that sparked an oil-industry revolution in the U.S., are
also expected to be sold this year.
Many of the world's largest oil companies are participating in
the auction, including Exxon Mobil (XOM), Chevron Corp. (CVX) and
BP PLC (BP).
Write to Jeff Fick at jeff.fick@dowjones.com
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