Brazil’s pre-salt adding flavor to Petroleo Brasileiro Petrobras SA (NYSE:PBR)
On Thursday, the ANP or the National Petroleum Agency said that the consortium that will eventually win the 1st exploration concession contracts auction for Brazil’s presalt oil deposits is required to pay the Brazilian government a $6.6 billion (15 billion reais) signing “bonus”. On Oct 21, The ANP is planning on auctioning-off Brazil’s biggest oil discovery, Libra, with recoverable reserves that are estimated at between 8B and 12B barrels of crude. This will be the 1st pre-salt prospect auction that the country is holding, under the new production sharing agreements.
As per the terms of the auction, the government will be receiving a minimum of 40% of the oil post development costs, and the state-controlled oil company, Petroleo Brasileiro Petrobras SA (NYSE:PBR), has to have a minimum 30 percent stake in the winning consortium.
The pre-salt backdrop
The pre-salt is an area that lies just off the coast of Brazil. Billions of barrels of crude oil as well as natural gas were discovered embedded under a salt layer in the deep waters of the Atlantic Ocean. Petroleo Brasileiro SA (Petrobras)’s oil discovery could well be the largest in the past 30 years. The country is already prospering and this discovery will catapult it into the major league oil-exporters. This area is also known as the Carioca-Sugar Loaf. It is located 275 km off the Rio de Janeiro and Sao Paulo coast. Carioca remained unknown to explorers until very recently simply because energy companies did not have the technology to assess these prospects that were obscured by the dense undersea salt formations.
Why did no one discover it earlier?
Salt poses to be an issue for geologists as it absorbs seismic energy. This is why it is not possible to obtain typical visualization results. In addition to this, there was no technology that could dig to these depths, ten years ago. It was only the Tupi discovery, two years ago, that brought Brazil’s offshore basins into the limelight. Petrobras controls 45% of the Carioca field, 30% is held by DCC Plc’s British Gas LP Gas Ltd while 5% is controlled by Repsol. As far as Petroleo Brasileiro Petrobras SA (NYSE:PBR) fortunes are concerned, this is a distinctly significant find.