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Brazil Studying Market Appetite for New Oil/Gas Block Auction

Source: Reuters 2/20/2015, Location: South America

Brazil is gauging market interest in exploring for oil and gas in the country before deciding whether to go ahead with a new auction of blocks in the first half of this year, the Energy Ministry said.

The 13th oil rights auction, Brazil's first sale of oil and gas concession rights since 2013, is currently scheduled for between late April and mid-May, according to oil regulator ANP.

But a corruption scandal engulfing state-run oil giant Petroleo Brasileiro SA and the recent plunge in oil prices have raised the possibility that the auction will have to be put off until the second half of 2015.

The widening corruption investigation has deepened Petrobras' financial woes and struck some of its main suppliers.

The Energy Ministry said a decision is still in the works, though time is running out.

"For the moment, we are studying market conditions and the situation of the companies that supply goods and services in the country," the ministry said.

It said a decision on which blocks will be auctioned must be made before the end of February if the auction is to happen by June.

Executives from some of Brazil's largest construction and engineering firms have been arrested for allegedly skimming billions of dollars off contracts with Petrobras.

Uncertainty over Petrobras' future and its capacity to invest in the exploration of new oil fields has raised doubts about the auction, said Alexandre Calmon, an oil industry lawyer and partner at Veirano Advogados law firm in Rio de Janeiro.

"Petrobras' problem is financial. If it is in financial trouble, how can the government go ahead with the auction?" he said.

The lack of definition on the auction has pushed oil companies to look at prospects in other countries with greater interest, Calmon said.

The 13th oil rights auction is expected to offer areas in Brazil's promising Eastern Margin offshore region, but would not include any of the so-called "subsalt" resources.

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