Brazil’s QGEP: oil royalties dispute unlikely to delay concession auctions

Jeff Fick – Fox Business/Dow Jones Newswires, 03/14/2013

The threat of lawsuits by major oil-producing states Rio de Janeiro, Espirito Santo and Sao Paulo to fight the equal distribution of royalties from existing and future oil production between Brazil’s 27 states does “raise the risk” of a delay, QGEP Chief Executive Lincoln Guardado said Thursday during a conference call with analysts. The risk, however, has been diminished by recent signs that nonproducing states are willing to negotiate a deal to avoid a protracted fight in the courts.

The deal would reverse changes implemented last week when Brazil’s Congress voted to overturn a presidential veto of key portions of new oil-royalties legislation, equally distributing royalties from existing and future oil production between the country’s 27 states. Rio, Espirito Santo and Sao Paulo, however, plan to fight the changes by filing lawsuits with Brazil’s Supreme Court.

Oil companies are eagerly awaiting Brazil’s 11th-round auction of oil and natural-gas-exploration concessions, which is set for May 14-15. The last auction in Brazil was held in December 2008, and oil companies have said they are running out of areas to explore. Given the government’s desire to promote the bidding round, even if there is a delay because of a legal tussle the auction, “should still be held in the first half of 2013,” Mr. Guardado said.

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Rousseff expands Brazil oil auction to raise up to $4.9 billion

Mario Sergio Lima, Peter Millard – Bloomberg, 01/23/2013

President Dilma Rousseff expanded by 68 percent the amount of acreage offered in Brazil’s first oil exploration auction since 2008 in a move that will help relieve pent-up demand and increase the government’s auction revenue by raising as much as 10 billion reais ($4.9 billion).

Brazil will auction 289 licenses onshore and off the coast of northeastern Brazil on May 14 and May 15, Marco Antonio Almeida, the secretary of oil and natural gas at the Energy Ministry, told reporters in Brasilia today. Brazil also plans to auction areas in the so-called pre-salt region that holds the country’s largest deposits on Nov. 28 and Nov. 29 and shale onshore gas blocks on Dec. 11 and Dec. 12, he said.

Petroleo Brasileiro SA (PETR4), the world’s biggest producer in deep waters, has discovered high-quality oil in the Ceara and Sergipe basins, where new blocks will be available. The geology along Brazil’s equator also mirrors recent discoveries near the coast of Africa.

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