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Investment Partnerships Program - PPI

Pre-salt public sale is attracting oil companies from all over the world

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31 de outubro de 2017

Pre-salt public sale is attracting oil companies from all over the world

The 2nd and 3rd rounds for Pre-Salt's Production Shares, held on October 27 by  Brazil's National Petroleum Agency (ANP), consolidated the resumption of oil and natural gas sector in Brazil. Six blocks were auctioned, from eight offered in the two public sales, which generated R$ 6.15 billion for bonnus signing collection of R$ 760 million in investments foreseen in the Minimum Exploratory Program.



Questions and Answers

 What will be offered in the 2nd and 3rd Pre-Salt Rounds public sale?

High potential basin blocks will be offered. The objective is to rebuild and expand reserves and Brazilian production of oil and natural gas and to meet the growing domestic demand in the Campos and Santos Basins (CNPE Resolution 2/2017 and 9/2017).

  What is the production potential of Pre-Salt areas?

Pre-Salt has an extraordinary production potential, with a daily average of the largest wells in operation of 30,000 bbl/d (barrels per day) in large structures and reservoirs of high quality and light oil. In 2017, the average production was 1.56 million boe/d (barrels of oil equivalent per day) (ANP, 2017).

 What are the main innovations in this contest in relation to the 1st Round of the Pre-Salt?

• Changes related to the preemptive rights of Petrobras as operator;
• Specific information regarding the process of individualization of production for objects offered in the 2nd Round;
• Amendment of the rules in order to allow participation in the non-operator mode for Investment Funds in Shares (FIPs);
• Estimate of the possibility for using documents presented in a share bidding process round for another one (pre-announcement of the 2nd one foresees the use of the documents forwarded to the 3rd one and vice-versa);
• Review of technical qualification criteria for qualification as Operator A;
• Improvement in the systematics for submitting offers, among others.

  What are the criteria for the qualification of concessionaires?

Bidders may be qualified as "A" operator, "B" operator or "non-operator":
a) operator A - qualified to operate in ultra deep water, deep water, shallow water and land;
b) operator B - qualified to operate in blocks located in shallow water and land;
c) non-operator - qualified to act in a consortium.

 How will the bidding process take place?

During the public session, the qualified companies will present offers for each of the blocks in bidding process. The signature bonuses are fixed for the two rounds and the surplus in oil for the Union is the sole criterion for defining the winning bidder.
The bids will be judged and classified according to the descending order of the surplus in oil for the Union, and a bidder will be declared the winner by offering the highest percentage for the Union.

Due to the results of the 14th Round, the ANP approved the "recap" concept in the current public sale (2nd and 3rd Round) in order to reopen bid deadline for bids that did not receive bids. This new deadline will be given after the conclusion of each of the rounds.

 What are the expectations with the success of the public sale?

The expected results of the eight areas in the Santos and Campos Basins to be bidden in the Rounds will generate US$ 36 billion in investments taking into account the need to drill wells, production units, pipelines and collection lines. In addition, the development of reserves should generate about US$ 130 billion in royalties, oil-income and income tax (ANP, 2017).

 How will the Union's gains?

Union gains can be classified into three categories:

1. Investments, employment and income
The oil cost is the portion of the production of oil and/or natural gas corresponding to the costs and investments made by the contracted company in the execution of the exploration, production and decommissioning activities (with direct and indirect generation of jobs). As disclosed by the ANP in the publication entitled "Opportunities in the Oil and Natural Gas Sector in Brazil. Bidding Rounds 2017-2019" (available here), the planned and ongoing bidding rounds create opportunities for all types and profiles of exploration and production companies.

2. Signature Bonus
The signature bonus corresponds to the amount, in reais (R$), to be paid by the winning bidder, in a single installment, within the period established by the ANP, as a condition for signing the production-sharing agreement for the block that is the purpose of the offer. The estimate of signature bonuses with the two Rounds amounts to R$ 7.75 billion.

3. Oil Surplus
The Union oil surplus will vary depending on the Brent oil barrel price and the average daily production of the active producer wells, considering, for that, the value of the signature bonus, the development of the production in individualized modules and the flow during the term of the production share agreement. The minimum percentages of the Union's oil surplus over the period of the production-sharing agreement, consider the Brent oil price as US$ 50.00 (fifty dollars) and the average daily production of 11,000 (eleven thousand) barrels of oil per well active producer.

 How will Petrobras take part in it?

According to the legislation in force, Petrobras has the preemptive right to act as an operator in the Pre-Salt blocks. In a consortium, the operating company is the one that will be responsible for conducting and executing all the activities provided for in the agreement.

Petrobras opted to be an operator with a 30% stake in the block of the Sapinhoá Field (Sapinhoá Environment), in the 2nd Round, and also with 30% in the Peroba and Alto de Cabo Frio - Central blocks of the 3rd Round.
For the blocks in which it exercised its preference to act as an operator, Petrobras must:

a) Make up a consortium with the winning bidder if the percentage of the oil surplus for the Union offered for the block bid is equal to the minimum percentage defined in the bid notice;
b) Decide, during the public bidding session, within 30 minutes, whether the consortium will join the winning bidder if the percentage of the oil surplus for the Union offered is higher than the minimum percentage established in the bid notice.
In case Petrobras decides not to join the consortium, the winning bidder, individually or in a consortium, will assume 100% (one hundred percent) of the stake in the bidden block, and must indicate the operator and the new participation percentages.
 

2nd Production Share Round

 What will the 2nd Round offer?

The 2nd Round will offer four areas with unitizable deposits, that is, adjacent to fields or prospects whose reservoirs extend beyond the contracted area. The areas are named from the south of Gato do Mato, north of Carcará and surrounding Sapinhoá, in the Santos Basin, in addition to the southwest of Tartaruga Verde, in the Campos Basin.

 What is the collection estimate with grants?

The collection estimate, with the granting of the four blocks, is estimated at R$ 3.4 billion reais (signature bonus).

 How many companies have been qualified for the 2nd Round of the Pre-Salt and how were they classified?

Nine qualified bidders were authorized as operator "A" and one "non-operator" qualified bidder (it only can submit offers in consortium with another bidder).


3rd Production Share Round

 What will the 3rd Round offer?

The 3rd Round will offer four areas located in the Campos and Santos basins, in the region of the pre-salt polygon, regarding the prospects of Pau Brasil, Peroba, Alto de Cabo Frio-West and Alto de Cabo Frio-Center.

 What is the collection estimate with grants?

The collection estimate, with the granting of four blocks, is estimated at R$ 4.35 billion reais (signature bonus).

 How many companies were qualified for the 3rd Round of the Pre-Salt and how they were classified?

For the 3rd Production Share Bidding Process, we have 10 bidders qualified as operator "A" and four bidders qualified as "non-operator" (they can only submit offers in consortium with another bidder).

Source: PPI

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