March 29, 2018 / 10:04 AM / 6 months ago

Oil majors to vie for Brazil offshore stakes despite legal setbacks

RIO DE JANEIRO, March 29 (Reuters) - Oil majors will gather in Rio de Janeiro on Thursday to vie for stakes in offshore blocks near Brazil's coveted pre-salt oil play, even after a court tossed the top two areas out of the running.

Twenty companies including Chevron, BP, Exxon Mobil, Royal Dutch Shell, Statoil, and Total have registered to bid in a concession-style auction where 68 on and offshore blocks are being offered.

Big bids were expected for two choice blocks in the offshore Santos basin that required minimum bids of 1.65 billion reais ($496.91 million) and 1.9 billion reais each and were thought to contain pre-salt geology.

But in a twist that cast a shadow over the auction, an audit court blocked the inclusion of those blocks, arguing their pre-salt potential meant they should be auctioned off under a production sharing model to create more value for the state.

"There are blocks that will be appealing to the sector, but (the court) threw out the choice cuts," said Adriano Pires, a consultant at Brazil's Center for Infrastructure, who said the government's take would be badly hit by the exclusion.

Higher oil prices have boosted appetite among oil majors for costlier, higher-yield offshore ventures, though some projects are still seen as too pricey to be viable.

In Brazil's world-famous pre-salt play, billions of barrels of oil lie under thousands of feet of salt beneath the ocean floor.

Fifteen blocks in the offshore Campos and Santos basin, which contain pre-salt geology, will still be available.

Blocks in the offshore Ceara, Potiguar and Sergipe-Alagoas basins are also on the table, as well as areas in the onshore basins of Parnaiba and Parana.

On Tuesday, Petrobras Chief Executive Officer Pedro Parente said the company would participate selectively in the auction, opting to form consortia with other firms to bid for blocks that require big investments.

Some expect bids may be bigger than usual ahead of a wide-open presidential election in October that could launch into power a candidate seeking to halt or slow private investment in Brazil's oil sector.

But there may be more opportunities that previously thought to take stakes in Brazil's pre-salt this year.

Oil regulator ANP has scheduled a pre-salt round for June, which could be followed by an auction of top geology pre-salt areas in the Santos basin in the second half of the year if the government and Petrobras can end a dispute over the area.

The Mining and Energy Ministry also said on Wednesday it would seek to auction the two Santos blocks eliminated by the court later this year.

$1 = 3.3382 reais Reporting by Alexandra Alper; editing by Grant McCool

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