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Brazil increases profit-oil minimums for fifth subsalt bid round: ANP

Rio de Janeiro — Brazil increased the minimum profit-oil guarantees for two of the four subsalt blocks that will be sold at the country's fifth production-sharing auction September 28, according to rules and contracts for the sale that the National Petroleum Agency published Friday.

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The minimum profit-oil guarantee for the Saturno prospect, considered the most attractive up for sale, was raised to 17.54% from 9.56%, ANP said. The Tita prospect, meanwhile, was increased to 9.53% from 5.80%.

The changes were made under order from Brazil's Federal Audit Court, or TCU, after the government-spending watchdog ruled that the previous guarantees could cost Brazil potential revenues. But the higher guarantees are unlikely to affect interest in two of the most-promising pieces of subsalt acreage available in the sale, especially considering uncertainty about future licensing sales ahead of October's presidential elections, industry officials told S&P Global Platts.

The Saturno and Tita blocks were reconfigured and combined with areas that were removed from the fourth production-sharing auction and 15th bid round held earlier this year. The two areas were estimated to hold 12 billion barrels of oil in place, according to the ANP.

The areas were removed on the eve of the 15th bid round and mere days before the fourth production-sharing sale, with executives from companies such as Shell and ExxonMobil expressing frustration with the moves at the time.

Saturno was combined with the Santos Basin S-M-645 block, which was removed from the 15th bid round. The block contains two prospects: Saturno and Dione. In addition to the increased minimum profit-oil guarantee, winning bidders will also pay a signing bonus of Real 3.125 billion.

The area is situated southeast of the massive Mero Field, which was the first subsalt field sold under Brazil's production-sharing regime in 2013. The field is estimated to hold 3.1 billion barrels of recoverable reserves. A long-term well test is currently underway at Mero, producing about 40,000 b/d.

The Tita area, meanwhile, was combined with the S-M-534 in the Santos Basin that was also removed from the 15th bid round. The signing bonus for Tita was also set at Real 3.125 billion.

ExxonMobil and Qatar Petroleum snapped up the S-M-647 block directly south of Saturno and the S-M-536 block directly south of Tita during the 15th bid round. According to industry officials, the 15th-round acquisitions likely mean ExxonMobil will bid aggressively for the areas in an attempt to avoid any potential issues with unitization of discoveries.

The Pau Brasil and Sudoeste de Tartaruga Verde blocks, which failed to sell at production-sharing auctions held in October 2017, will once again be offered during the fifth bid round, the ANP said.

Pau Brasil is a large block bounded by the massive Lula Field, the Jupiter natural gas discovery and the Peroba subsalt area. Pau Brasil is estimated to hold 4.1 billion barrels of oil in place, although there are concerns about high level of contaminants such as carbon dioxide, according to industry officials.

The signing bonus for Pau Brasil was set at Real 500 million, with a minimum profit-oil guarantee of 24.82%.

Interest in the Sudoeste de Tartaruga Verde, meanwhile, will likely benefit from the recent startup of the Tartaruga Verde field by state-owned oil company Petrobras. Petrobras owns 100% of Tartaruga Verde, but the field is part of the company's $21 billion divestment plan for 2017-2018.

Petrobras maintained its preferential right to own a 30% operating stake in the field, the ANP said. Petrobras is expected to make a play for Sudoeste de Tartaruga Verde, which would eliminate any unitization issues with the nearby Tartaruga Verde Field and make the asset more attractive to sell.

Sudoeste de Tartaruga Verde is estimated to hold 160 million barrels of oil in place, the portion of the Tartaruga Verde Field reservoir that extends into the adjacent block, according to the ANP. The signing bonus for Sudoeste de Tartaruga Verde was set at Real 70 million, with a minimum profit-oil guarantee of 10.01%. --Jeff Fick, newsdesk@spglobal.com

--Edited by Valarie Jackson, valarie.jackson@spglobal.com