Shell Dominates Disappointing Brazilian Lease Round
The country’s 17th Bidding Round attracted bids on just five of the 92 blocks on offer… and all from Shell.
Brazil’s 17th Bidding Round covering oil and natural gas licenses offshore failed to generate much interest among international players with just five of the 92 blocks on offer receiving bids—and all from supermajor Shell. Only nine companies registered for the auction, down from 17 for the 16th bid round held in 2019.
Shell dominated the sale, scooping up stakes in five Santos Basin blocks. The operator purchased 100% stakes in the S-M-1707, S-M-1715, S-M-1717, and S-M-1719 blocks, paying total signing bonuses of about $5.5 million. The company paid $1.7 million for the S-M-1707 block, the highest single bid in the auction.
In addition, Shell paired up with Colombia’s Ecopetrol to lease S-M-1709, also in the Santos Basin. Shell will hold a 70% operating stake while Ecopetrol will retain the remaining 30% interest.
The leased blocks are located primarily in the southern portion of the Santos. Shell is no stranger to the basin. The company operates the Gato do Mato and Sul de Gato do Mato subsalt fields in the area.
According to the ANP, Brazil’s National Petroleum Agency, the round will generate investments of at least $24.7 million in the first years of the contracts for the five blocks acquired. Officials downplayed the lack of overall interest in the round, especially among big international oil companies such as BP and ExxonMobil, who did not participate.
“It is important to remember that this round focused on new exploratory frontiers that are areas with a lot of risk for companies in the sector,” said Rodolfo Saboia, director general of the ANP. “And these companies set their budgets the year before. So, they did this when the global pandemic situation was most acute. The context of the international oil industry is still quite challenging. With all this, there was not, and could not be, an expectation that all the blocks would be sold off.”
The blocks that failed to sell as part of this bid round will now be evaluated for possible inclusion in Brazil’s Open Acreage program. The program includes all blocks and mature fields that failed to sell at previous auctions or were returned to the ANP.
Brazil announced details of its 17th Bidding Round in late 2020, in which 92 blocks in the offshore Campos, Pelotas, Potiguar, and Santos Basins were included, covering a total of 53,900 km2.