Brazil Independent PRIO Joins Majors to Take Deep-Water Oil Blocks

Brazil awarded more than half of the oil blocks it offered in a deep-water region off its southeastern coast on Wednesday, drawing bids from Brazilian independent PRIO SA and oil majors including Petrobras and Equinor ASA.

Chinese oil majors CNOOC Ltd. and China Petroleum & Chemical Corp., or Sinopec, also jointly won a block without any local partners. Overall competition was limited, with 7 of the 13 blocks offered in the pre-salt area attracting only one bid each. Some blocks that were considered attractive, such as the Opala prospect in the Santos basin near the giant Buzios field, didn’t get any offers.

Still, premiums were high for a record number of blocks awarded in a production-sharing auction, said Luis Fernando Paroli, the president of PPSA, a state company that represents the government’s interest in pre-salt oil projects. Companies are targeting areas near existing operations to connect any discoveries to existing production systems, he said.

“The pre-salt’s largest areas have already been explored,” he told reporters at the bid round in Rio de Janeiro. “There are other promising areas, but because we’re talking about ultra-deep waters, discoveries need to be very large to be economically viable.”

The blocks are under a production-sharing model where companies compete by offering the largest share of profit oil to the government. The highest profit oil offered was 32.8% bid by PRIO for the Magnetita block. PRIO said the two pre-salt blocks it has are near its Frade and Wahoo projects, and any exploration successes could be connected to its Valente floating production vessel.

Brazil’s pre-salt is one of the world’s most prolific offshore oil regions. Its development has helped turn the country into Latin America’s largest producer and one of the biggest sources of new supply in the Americas this year as the Iran war upended global oil markets. But a wave of giant discoveries that started about two decades ago has faded and the Brazil’s output is expected to start declining in the 2030s.

“Brazil’s hopes lie in other exploration areas,” said Marcelo De Assis, an independent oil consultant based in Rio de Janeiro. “My overall view was a weak result with no competition, low government profit oil percentages and about half of the blocks gone.”

The Rodocrosita block in Santos basin won by Equinor has synergies with its Bacalhau project, its largest offshore field outside of Norway, said Letícia Andrade, its vice-president for exploration and production in Brazil. The company won the block in partnership with Galp Energia SGPS SA, which has a minority 30% stake. Equinor also won the Rubi block in the same basin with a 100% stake.

More than 300 additional blocks on land and in more frontier exploration areas will be offered later today by Brazil’s oil regulator, known as the ANP, under a separate concession model.