Brazil to Hold Presalt Oil Block Auction in 2011

ImageJanuary 3, 2011

RIO DE JANEIRO -(Dow Jones)- Brazil's new government will auction rights to develop mammoth offshore oil and gas blocks this year, under new rules recently approved by Congress, incoming Mines and Energy Minister Edison Lobao said Monday.

A number of mammoth oil fields have been discovered off the southeast coast of Brazil, lying in ultra-deep water and below more than three miles of sand, rocks and a shifting layer of salt. The area is estimated to hold between 50 billion and 100 billion barrels of oil, enough to turn Brazil into one of the world's top five crude-oil producers.

The first auction of these so-called presalt fields could be held in the second half of the year, although new legislation on how much would be charged as a royalty on production, and how that money would be distributed among state and municipal governments would have to be approved first, Lobao said during a ceremony in which he took office.

"We're very confident Congress will help us, it's a matter of national interest," Lobao said during the ceremony at the mines and energy ministry.

The auction is expected to include some of the reserves discovered in the massive Libra area, estimated by Brazil's Oil Regulatory Agency ANP to hold recoverable reserves of between 3.7 billion and 15 billion barrels of oil equivalent.

These fields will be handed over under different terms from the more traditional concessions used in the oil licensing rounds held in Brazil over the last decade. Lobao said a separate auction of the more traditional oil fields should go ahead in the first half of the year. This would be Brazil's 11th round of auctions, and the first since 2008.

Final approval for the planned 2011 auctions is still required from the country's National Energy Policy Commission, or CNPE, which will also define exactly which areas will be put up for auction, an ANP spokesman said. However, the ANP, which will organise the auctions, already has everything ready for the 11th round and the intention is also to proceed with the presalt round this year, he said.

ANP President Harold Lima said early December that the 11th round may include areas in the equatorial margin region, which runs from Bahia in northeast Brazil to Amazonas in Brazil's far north. This would include onshore, shallow water and deep water blocks, but wouldn't include presalt blocks.

Meanwhile, towards the end of the year the government may also grant concessions for the building of gas pipelines, Lobao said.

Lobao, who was previously mines and energy minister under the government of Luiz Inacio Lula da Silva, was reappointed to the post by President Rousseff. Lobao had left his post in March to run for senator during the recent Brazilian election period.

Source: Fox Business News; www.foxbusiness.com

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