Despite Last-Minute Drama, Brazil Pulls Off A Historic First In Oil

China continued to cement its growing resource relationship with Brazil this week. With reports emerging that a Chinese consortium will bid to construct a 1,100 km, $3.9 billion railway to transport grain from Brazil’s central-west region to the northern port of Miritituba. 

But even bigger things were afoot the past few days in Brazil’s oil sector. Where officials pushed through a last-minute judicial scare in order to pull off a historic bid round for offshore rights in the prolific pre-salt play.

As I’ve discussed at length, this was the first-ever bid round conducted since Brazil scrapped rules requiring state participation in pre-salt blocks. Making this the first chance international firms have had to bid on 100% owned projects.

The prospect of foreign ownership didn’t sit well however with Brazil’s leftist Workers Party. Who filed a court injunction last Friday morning — causing a judge to order a halt to the pre-salt bid round, just hours before it was supposed to start. 

Government officials scrambled and managed to get the injunction lifted — paving the way for bidding to take place later that day. 

And the results were impressive. 

The winning bidder list was a who’s who of global oil: with Shell, BP, ExxonMobil, Total, Repsol, Sinopec, CNOOC, Qatar Petroleum, Statoil, and Galp all grabbing winning bids. Even Brazil state firm Petrobras picked up acreage — through bidding, rather than by default as in the past. 

That represents one of the most internationally-diverse rounds of awards seen anywhere in the world recently (with Russia being the only notable geographic absence). Showing that Brazil’s new oil rules are working in drawing renewed interest to the country. 

All told, regulators awarded 6 of 8 blocks being offered. With officials saying that signing bonuses will total nearly $1.9 billion — and total investment will likely come in just under $31 billion. 

That’s a major victory for this former oil giant, which had been slipping in the international scene the last few years. Watch for knock-on interest in future planned bid rounds, and for some new and significant discoveries likely coming in the revitalized sector here. 

Here’s to everyone coming to the party,

Dave Forest

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