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BG Group satisfied after winning 10 of 12 Brazil exploration blocks

BY JEFF FICK

RIO DE JANEIRO -- BG Brasil won 10 of the 12 offshore oil and natural gas exploration blocks the company bid for in a hotly contested auction, leaving BG "satisfied" with its performance, BG Brasil President Nelson Silva said.

BG paid about $200 million in signing bonuses and committed to investments of about $700 million to drill seven wells in the Barreirinhas Basin, an area along Brazil' s northern coastline that is part of the country' s equatorial margin, Mr. Silva said. The equatorial margin generated intense bidding in Brazil' s 11th round auction of 289 oil and natural gas exploration concessions, the country' s first in five years.

Oil companies were attracted to the area, hoping that recent discoveries off the coast of West Africa and French Guiana would translate to Brazil' s coast. "Participants are looking at the discoveries made in other areas of the world for geologic similarities" Mr. Silva said.

BG went solo in bids for six offshore blocks, holding a 100% stake in the concessions. In the four remaining blocks, BG teamed with Petrobras and Galp Energia. BG will operate the blocks with a 50% stake, while Petrobras will take 40% and Galp 10%. The companies hope to repeat their successful partnership in the BM-S-11 block, where the companies found oil buried deep under a thick layer of salt in an area known as the presalt.

"We' re very happy to be together with them in Barreirinhas now and having BG as the operator shows the level of confidence between the partners" Mr. Silva said.


In the winning bids, BG pledged to use 39% locally produced goods and services during the exploration phase and 65% during the development phase. Magda Chambriard, President of Brazil' s National Petroleum Agency (ANP), said oil companies were keeping local content commitments at the minimum level required to bid, taking a "cautious" approach toward pledges to use local goods and services.

BG made "very careful" calculations to determine its local content commitments, Mr. Silva said. "We want to promise percentages that we can deliver" Mr. Silva said. "We' re confident that we can deliver these numbers."

The auction is the first of several sales of exploration acreage set to take place in Brazil this year, including the first sale of subsalt exploration acreage under new production-sharing agreements.

Billions of barrels of oil have been discovered in the subsalt region, where oil and natural gas were found trapped deep beneath the ocean floor under a thick layer of salt. Unconventional oil and natural gas concessions, the same type of shale and tight gas acreage that sparked an oil-industry revolution in the United States, are also expected to be sold this year.

Dow Jones Newswires

05/15/2013

 

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