Brazil upstream bid rounds – evolve to grow: Brazil to become a top 5 oil producer by 2030?

Brazil just conducted two massive pre-salt bid rounds – one with areas holding over 10 billion boe of discovered reserves – and another with close to 40 billion P50 unrisked oil initially in place – in the most prolific and sought after exploration and production area of the last decade. The auctions attracted international attention and leading IOCs and NOCs registered for the bid rounds. Brazil achieved 65% of its original objective and collected a record $18.7 billion in signature bonus.  Despite the impressive result and a very positive outcome for Government and Petrobras, media reaction has been mixed due to IOCs “no show” for what was mainly a Brazil-China event.  The energy comment reviews the bid rounds providing insights into why IOCs decided not to participate, the growing energy ties between Brazil and China, likely changes under consideration for future upstream bid rounds, and the need for the country to maintain high-levels of international competition to secure the sizable energy investments required. Brazil is on track to double oil production in the next decade becoming a top 5 global producer, and Government, policy makers and regulator should now consider how best to balance a wide range of objectives including the creation of tangible and lasting benefit for the country before hydrocarbon demand begins to decline as the world transitions to a society and economy with lower hydrocarbon use.

By: Claudio Steuer