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Brazil Seeks at Least $4.6 bln for Libra Field

Source: Reuters 6/10/2013, Location: South America

Brazil will ask investors to pay at least 10 billion reais ($4.6 billion), plus a share of future oil and natural gas output, for the right to develop the giant Libra offshore prospect it plans to sell in October, an oil regulatory official said.

The final value of the fixed cash "bonus" the winning investor or investors will have to pay has yet to be decided, but the 10 billion real figure is the minimum up-front payment under a range of scenarios, Florival Carvalho, a member of the ANP's board of directors said at an event in Rio de Janeiro.

"If you raise the upfront bonus you reduce the amount of oil you receive and vice-versa," he said. "The government needs to decide if it wants more bonus or more oil because the bonus is a pre-payment of revenue."

Libra holds an estimated 12 billion barrels of recoverable oil, according to the ANP and certification agency Veritas. Discovered in May 2010 it is Brazil's largest-ever oil find and one of the biggest petroleum assets ever put up for sale.

The sale will also be the first in Brazil under the production-sharing contract model. Rights will go to the group that agrees to pay the up-front bonus and offers Brazil's government the largest share of future output to sell on its own account.

Under a 2010 law, the sale of Libra and other un-leased areas in the so-called Subsalt Polygon will require state-led Petroleo Brasileiro SA, or Petrobras to take a minimum 30 percent stake in any winning project whether it makes a bid for the area or not.

Rio de Janeiro-based Petrobras will also have to pay at least 30 percent of the investment required to develop the block and lead its development as the field's official operator.

The Subsalt Polygon is an offshore area half the size of Italy. It covers oil provinces that are already home to more than 80 percent of Brazil's output and may contain as much as 100 billion barrels of oil, according to Rio de Janeiro State University.

The area gets its name from giant discoveries, starting in 2007, that were made below a layer of salt, deep beneath the seabed, although most current output and much of its potential lies above the salt layer.

On Friday, Petrobras CEO Maria das Gracas Foster said the company was considering partnerships in bidding groups that could increase its stake above 30 percent if their group won the auction.

The government is likely to have the auction tender ready by the end of this month, Carvalho said adding that the sale is likely to attract bids from the world's largest oil company.

"This sale is not for small companies. It's for big companies joined up in groups," he said.

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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

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