Petrobras Will Be 'Selective, Focused' in Oil Concession Auction

RIO DE JANEIRO - Brazilian state-run energy giant Petroleo Brasileiro SA, or Petrobras, is in talks with the world's largest oil companies about forming partnerships to bid for new oil and natural-gas exploration concessions at a much-anticipated auction set for next month, Chief Executive Maria das Gracas Foster said in an interview.

"Our participation in the auctions this year is going to be focused and selective," Ms. Foster said. "We are making it a priority to work in partnership with big oil companies."

Brazil will auction off 289 oil and natural-gas exploration blocks on May 14-15, the country's first such auction of new exploration acreage since 2008. This auction doesn't include blocks from the subsalt area, as these will be sold later this year at an auction that will be under new legislation passed in the wake of the discovery.

Potential tie-ups with big oil companies for the round of blocks in May would help to reduce costs for Petrobras as the company embarks on a $237 billion investment plan through 2017, one of the world's largest corporate-spending campaigns, as well as ease the company's workload as it moves quickly to boost flagging crude-oil output by bringing the massive new subsalt fields into production.

While partnerships would help to diminish the company's financial risk in the new exploration areas, they would also provide a sounding board to discuss the best way to develop any potential discoveries, Ms. Foster said in an interview this week.

After primarily playing the lead role in Brazil's offshore oil industry for more than 30 years, Petrobras also appears ready to let potential partners take the reins for awhile. "We are negotiating to not be the operator" in new exploration blocks, Ms. Foster said.

Because Petrobras already serves as the operator in many of its oil fields and exploration blocks, Ms. Foster said that "we are discussing the partner's interest in being the operator. We're not going to fight about that."

But with whichever companies Petrobras forms partnerships for this year's planned auctions, they will be major players, Ms. Foster emphasized. The companies will have know-how and be strong financially, Ms. Foster said.

On Thursday, Royal Dutch Shell PLC Chief Executive Peter Voser noted that his company has "a very successful partnership" with Petrobras and is interested in further collaboration. The oil major will study the bid areas but hasn't yet decided whether it will participated in the May auction, he said.

Separately, Ms. Foster said Petrobras isn't considering taking an active role in developing infrastructure projects with billionaire Brazilian businessman Eike Batista's EBX Group of companies. EBX holds interests in such diverse areas as mining, real estate, shipbuilding, oil production and ports.

"Petrobras is not going to participate in the construction of any shipyard," Ms. Foster said. "Petrobras doesn't know anything about shipyards, Petrobras wants to use shipyards."

Mr. Batista's shipbuilding company, OSX Brasil, was part of a consortium that won a tender to provide processing modules for two floating-production platforms, Ms. Foster noted.

Brazil is especially keen to see the Acu port currently under construction by Mr. Batista's LLX Logistica completed, according to a person close to the government. Since September, Petrobras has held talks with EBX Group about buying services from the group, but won't go beyond that, Ms. Foster said.

"What we are seeking with this group are contracts to use the infrastructure it's building," Ms. Foster said. "Because [LLX] is building the port, but hasn't completed construction yet, these contracts will only happen when the port is built and will have to be at the lowest cost."

Petrobras will hold a tender that will make sure any services are contracted at the lowest-possible price, Ms. Foster added. Talks with EBX Group will likely be "better defined" starting in June, but contracts are unlikely to be signed at that time, Ms. Foster said. "I don't have any dates set to sign contracts," the executive said.

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Petrobras Will Be 'Selective, Focused' in Oil Concession Auction

RIO DE JANEIRO - Brazilian state-run energy giant Petroleo Brasileiro SA, or Petrobras, is in talks with the world's largest oil companies about forming partnerships to bid for new oil and natural-gas exploration concessions at a much-anticipated auction set for next month, Chief Executive Maria das Gracas Foster said in an interview.

"Our participation in the auctions this year is going to be focused and selective," Ms. Foster said. "We are making it a priority to work in partnership with big oil companies."

Brazil will auction off 289 oil and natural-gas exploration blocks on May 14-15, the country's first such auction of new exploration acreage since 2008. This auction doesn't include blocks from the subsalt area, as these will be sold later this year at an auction that will be under new legislation passed in the wake of the discovery.

Potential tie-ups with big oil companies for the round of blocks in May would help to reduce costs for Petrobras as the company embarks on a $237 billion investment plan through 2017, one of the world's largest corporate-spending campaigns, as well as ease the company's workload as it moves quickly to boost flagging crude-oil output by bringing the massive new subsalt fields into production.

While partnerships would help to diminish the company's financial risk in the new exploration areas, they would also provide a sounding board to discuss the best way to develop any potential discoveries, Ms. Foster said in an interview this week.

After primarily playing the lead role in Brazil's offshore oil industry for more than 30 years, Petrobras also appears ready to let potential partners take the reins for awhile. "We are negotiating to not be the operator" in new exploration blocks, Ms. Foster said.

Because Petrobras already serves as the operator in many of its oil fields and exploration blocks, Ms. Foster said that "we are discussing the partner's interest in being the operator. We're not going to fight about that."

But with whichever companies Petrobras forms partnerships for this year's planned auctions, they will be major players, Ms. Foster emphasized. The companies will have know-how and be strong financially, Ms. Foster said.

On Thursday, Royal Dutch Shell PLC Chief Executive Peter Voser noted that his company has "a very successful partnership" with Petrobras and is interested in further collaboration. The oil major will study the bid areas but hasn't yet decided whether it will participated in the May auction, he said.

Separately, Ms. Foster said Petrobras isn't considering taking an active role in developing infrastructure projects with billionaire Brazilian businessman Eike Batista's EBX Group of companies. EBX holds interests in such diverse areas as mining, real estate, shipbuilding, oil production and ports.

"Petrobras is not going to participate in the construction of any shipyard," Ms. Foster said. "Petrobras doesn't know anything about shipyards, Petrobras wants to use shipyards."

Mr. Batista's shipbuilding company, OSX Brasil, was part of a consortium that won a tender to provide processing modules for two floating-production platforms, Ms. Foster noted.

Brazil is especially keen to see the Acu port currently under construction by Mr. Batista's LLX Logistica completed, according to a person close to the government. Since September, Petrobras has held talks with EBX Group about buying services from the group, but won't go beyond that, Ms. Foster said.

"What we are seeking with this group are contracts to use the infrastructure it's building," Ms. Foster said. "Because [LLX] is building the port, but hasn't completed construction yet, these contracts will only happen when the port is built and will have to be at the lowest cost."

Petrobras will hold a tender that will make sure any services are contracted at the lowest-possible price, Ms. Foster added. Talks with EBX Group will likely be "better defined" starting in June, but contracts are unlikely to be signed at that time, Ms. Foster said. "I don't have any dates set to sign contracts," the executive said.

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Brazil's OGX Evaluating Funding Options for Concession Auction

RIO DE JANEIRO - Brazilian independent oil producer OGX Petroleo e Gas Participacoes SA plans to invest $1.3 billion in 2013, but that total doesn't include the company's potential participation in an important new auction of oil and natural-gas concessions, OGX's chief financial officer said Wednesday.

"We think that it is interesting for us to participate in the 11th bid round," CFO Roberto Monteiro said during a conference call with analysts. "But we are not disclosing at the moment how much we want to spend or even if we will participate."

Brazil is scheduled to hold the country's 11th auction of oil and natural-gas exploration blocks in May, the first such sale since December 2008.

OGX, part of billionaire Brazilian businessman Eike Batista's industrial empire, doesn't have the financial wiggle room to take on more debt, so participating in Brazil's 11th round auction of oil and natural-gas concessions will require "capital discipline," Mr. Monteiro said. OGX ended 2012 with $1.7 billion in cash.

Among the "alternatives" listed by Mr. Monteiro was a potential sale of a stake in some of OGX's exploration blocks and oil fields, where the company retains majority stakes of between 70% and 100%.

"We have some options still open," he said.

OGX had previously planned to sell a stake in its blocks in the Campos Basin, but never completed a deal.

During the conference call to discuss OGX's fourth-quarter earnings, company officials admitted disappointment with crude-oil output at the Tubarao Azul field. Lower-than-expected production at the field has not only weighed on the company's shares since mid-2012, but also dragged down shares of other companies under Mr. Batista's EBX Group umbrella. The production has generated concern among investors about the ability of his companies to generate returns.

"Production levels in the first two production wells stabilized at a rate below our earlier projections," Chief Executive Luiz Carneiro said during the call. That could result in a reduction in estimates for recoverable reserves at Tubarao Azul, currently projected at 110 million barrels of crude, the CEO added.

OGX officials also said that just because output at Tubarao Azul has been a disappointment doesn't mean that the results can be "extrapolated" to other fields such as Tubarao Martelo, which is expected to start production by year-end, Mr. Carneiro said.

The OSX-2 and OSX-3 floating production platforms should arrive in Brazil in the third quarter, Mr. Monteiro said. OSX-2 will be installed at the Tubarao Tigre, Tubarao Gato and Tubarao Areia fields, while OSX-3 will produce from the Tubarao Martelo field, the executive said.

A well-head platform will also arrive for installation at Tubarao Martelo "sometime mid-next year," Mr. Monteiro said.

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Brazil's OGX Evaluating Funding Options for Concession Auction

RIO DE JANEIRO - Brazilian independent oil producer OGX Petroleo e Gas Participacoes SA plans to invest $1.3 billion in 2013, but that total doesn't include the company's potential participation in an important new auction of oil and natural-gas concessions, OGX's chief financial officer said Wednesday.

"We think that it is interesting for us to participate in the 11th bid round," CFO Roberto Monteiro said during a conference call with analysts. "But we are not disclosing at the moment how much we want to spend or even if we will participate."

Brazil is scheduled to hold the country's 11th auction of oil and natural-gas exploration blocks in May, the first such sale since December 2008.

OGX, part of billionaire Brazilian businessman Eike Batista's industrial empire, doesn't have the financial wiggle room to take on more debt, so participating in Brazil's 11th round auction of oil and natural-gas concessions will require "capital discipline," Mr. Monteiro said. OGX ended 2012 with $1.7 billion in cash.

Among the "alternatives" listed by Mr. Monteiro was a potential sale of a stake in some of OGX's exploration blocks and oil fields, where the company retains majority stakes of between 70% and 100%.

"We have some options still open," he said.

OGX had previously planned to sell a stake in its blocks in the Campos Basin, but never completed a deal.

During the conference call to discuss OGX's fourth-quarter earnings, company officials admitted disappointment with crude-oil output at the Tubarao Azul field. Lower-than-expected production at the field has not only weighed on the company's shares since mid-2012, but also dragged down shares of other companies under Mr. Batista's EBX Group umbrella. The production has generated concern among investors about the ability of his companies to generate returns.

"Production levels in the first two production wells stabilized at a rate below our earlier projections," Chief Executive Luiz Carneiro said during the call. That could result in a reduction in estimates for recoverable reserves at Tubarao Azul, currently projected at 110 million barrels of crude, the CEO added.

OGX officials also said that just because output at Tubarao Azul has been a disappointment doesn't mean that the results can be "extrapolated" to other fields such as Tubarao Martelo, which is expected to start production by year-end, Mr. Carneiro said.

The OSX-2 and OSX-3 floating production platforms should arrive in Brazil in the third quarter, Mr. Monteiro said. OSX-2 will be installed at the Tubarao Tigre, Tubarao Gato and Tubarao Areia fields, while OSX-3 will produce from the Tubarao Martelo field, the executive said.

A well-head platform will also arrive for installation at Tubarao Martelo "sometime mid-next year," Mr. Monteiro said.

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Brazil's QGEP: Oil Royalties Dispute Unlikely to Delay Concession Auctions

RIO DE JANEIRO - Brazilian oil-and-natural gas company QGEP Participacoes said Thursday that an ongoing dispute over the distribution of oil royalties was unlikely to delay a much-anticipated auction of oil and natural-gas-exploration concessions.

The threat of lawsuits by major oil-producing states Rio de Janeiro, Espirito Santo and Sao Paulo to fight the equal distribution of royalties from existing and future oil production between Brazil's 27 states does "raise the risk" of a delay, QGEP Chief Executive Lincoln Guardado said Thursday during a conference call with analysts. The risk, however, has been diminished by recent signs that nonproducing states are willing to negotiate a deal to avoid a protracted fight in the courts.

The deal would reverse changes implemented last week when Brazil's Congress voted to overturn a presidential veto of key portions of new oil-royalties legislation, equally distributing royalties from existing and future oil production between the country's 27 states. Rio, Espirito Santo and Sao Paulo, however, plan to fight the changes by filing lawsuits with Brazil's Supreme Court.

Oil companies are eagerly awaiting Brazil's 11th-round auction of oil and natural-gas-exploration concessions, which is set for May 14-15. The last auction in Brazil was held in December 2008, and oil companies have said they are running out of areas to explore. Given the government's desire to promote the bidding round, even if there is a delay because of a legal tussle the auction, "should still be held in the first half of 2013," Mr. Guardado said.

QGEP has nearly one billion Brazilian reais ($510 million) in cash, giving the company "significant financial flexibility to participate in the auction," Mr. Guardado added.

Not only is QGEP looking toward the auction to improve its portfolio, but the company is also interested in seeing what assets state-run energy giant Petroleo Brasileiro, or Petrobras, makes available in its divestment plan. Petrobras previously said that it would sell off about $15 billion in assets, including some holdings in Brazil.

QGEP, the oil-and-natural-gas exploration arm of local industrial conglomerate Queiroz Galvao, also said it was interested in selling down its 100% stake in the BM-J-2 exploration block. While reducing the company's level of risk "makes business sense," Mr. Guardado said that the Brazilian market is "oversupplied" with opportunities to buy into offshore exploration blocks.

QGEP still doesn't have a timeline for when the company and its partners in the BM-S-8 block will release a volume estimate for the much-anticipated Carcara subsalt discovery, Mr. Guardado said. "We need more data to make an announcement on a range of volumes," he said. The executive, however, said that some estimates of recoverable reserves at about one billion barrels of crude oil and in-place oil volumes of about five billion barrels may be in the range of possibilities.

The estimates were "potential" numbers, but that other estimates also existed and needed to be further evaluated via a well-stem test that is set for the second half of 2013.

Carcara contains an oil column of more than 400 meters, one of the largest discovered in the subsalt region off Brazil's coast where billions of barrels of oil have been discovered under a layer of salt.

Late Wednesday, QGEP said that it recorded a net profit of BRL47.3 million in the fourth quarter of 2012, nearly doubling net profits in the same period the year before. Net profit jumped on higher natural-gas production from the company's Manati field and strong demand for the fuel in Brazil, QGEP said.

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Brazil's QGEP: Oil Royalties Dispute Unlikely to Delay Concession Auctions

RIO DE JANEIRO - Brazilian oil-and-natural gas company QGEP Participacoes said Thursday that an ongoing dispute over the distribution of oil royalties was unlikely to delay a much-anticipated auction of oil and natural-gas-exploration concessions.

The threat of lawsuits by major oil-producing states Rio de Janeiro, Espirito Santo and Sao Paulo to fight the equal distribution of royalties from existing and future oil production between Brazil's 27 states does "raise the risk" of a delay, QGEP Chief Executive Lincoln Guardado said Thursday during a conference call with analysts. The risk, however, has been diminished by recent signs that nonproducing states are willing to negotiate a deal to avoid a protracted fight in the courts.

The deal would reverse changes implemented last week when Brazil's Congress voted to overturn a presidential veto of key portions of new oil-royalties legislation, equally distributing royalties from existing and future oil production between the country's 27 states. Rio, Espirito Santo and Sao Paulo, however, plan to fight the changes by filing lawsuits with Brazil's Supreme Court.

Oil companies are eagerly awaiting Brazil's 11th-round auction of oil and natural-gas-exploration concessions, which is set for May 14-15. The last auction in Brazil was held in December 2008, and oil companies have said they are running out of areas to explore. Given the government's desire to promote the bidding round, even if there is a delay because of a legal tussle the auction, "should still be held in the first half of 2013," Mr. Guardado said.

QGEP has nearly one billion Brazilian reais ($510 million) in cash, giving the company "significant financial flexibility to participate in the auction," Mr. Guardado added.

Not only is QGEP looking toward the auction to improve its portfolio, but the company is also interested in seeing what assets state-run energy giant Petroleo Brasileiro, or Petrobras, makes available in its divestment plan. Petrobras previously said that it would sell off about $15 billion in assets, including some holdings in Brazil.

QGEP, the oil-and-natural-gas exploration arm of local industrial conglomerate Queiroz Galvao, also said it was interested in selling down its 100% stake in the BM-J-2 exploration block. While reducing the company's level of risk "makes business sense," Mr. Guardado said that the Brazilian market is "oversupplied" with opportunities to buy into offshore exploration blocks.

QGEP still doesn't have a timeline for when the company and its partners in the BM-S-8 block will release a volume estimate for the much-anticipated Carcara subsalt discovery, Mr. Guardado said. "We need more data to make an announcement on a range of volumes," he said. The executive, however, said that some estimates of recoverable reserves at about one billion barrels of crude oil and in-place oil volumes of about five billion barrels may be in the range of possibilities.

The estimates were "potential" numbers, but that other estimates also existed and needed to be further evaluated via a well-stem test that is set for the second half of 2013.

Carcara contains an oil column of more than 400 meters, one of the largest discovered in the subsalt region off Brazil's coast where billions of barrels of oil have been discovered under a layer of salt.

Late Wednesday, QGEP said that it recorded a net profit of BRL47.3 million in the fourth quarter of 2012, nearly doubling net profits in the same period the year before. Net profit jumped on higher natural-gas production from the company's Manati field and strong demand for the fuel in Brazil, QGEP said.

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Brazil Releases Tender, Contract Details for Oil Concession Auction

RIO DE JANEIRO - Brazil's National Petroleum Agency on Tuesday published the final tender and concession contract details for the keenly awaited auction of new oil and natural gas concessions set for May 14-15.

The so-called 11th bidding round will put 289 oil and natural gas exploration blocks up for sale, Brazil's first such auction since December 2008.

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 awards of exploration acreage.

The 11th round 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.

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Brazil Releases Tender, Contract Details for Oil Concession Auction

RIO DE JANEIRO - Brazil's National Petroleum Agency on Tuesday published the final tender and concession contract details for the keenly awaited auction of new oil and natural gas concessions set for May 14-15.

The so-called 11th bidding round will put 289 oil and natural gas exploration blocks up for sale, Brazil's first such auction since December 2008.

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 awards of exploration acreage.

The 11th round 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.

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Brazil Sets 11th Oil, Natural Gas Concession Auction for May

RIO DE JANEIRO - Brazil will hold its much-anticipated auction of new oil and natural gas exploration concessions on May 14 and 15, beefing up the so-called 11th bid round with additional blocks under order from President Dilma Rousseff, the Mines and Energy Ministry said Wednesday.

The 11th-round auction, the first since December 2008, will include 289 exploration blocks, said Marco Antonio Almeida, the ministry's secretary for oil and natural gas. Mines and Energy Minister Edison Lobao had said earlier this month that the 11th round would include 172 blocks, with about half of the blocks inland and half offshore.

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 ministry also said that the first of auction of subsalt exploration acreage under new production-sharing agreements had been preliminarily set for Nov. 28 and 29. 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.

The subsalt bid round would be followed by the sale of 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., on Dec. 11 and 12.

The 11th round will include areas in Brazil's equatorial margin, which runs from Bahia state to Amazonas state in the country's far north. Some of the blocks from the canceled eighth bidding round also will be included in this round, the ministry said.

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