(EnergyAsia, October 23 2013, Wednesday) — Brazil has awarded the rights to explore and develop its giant offshore Libra oilfield to a sole bid from a five-member international consortium led by its state-owned oil and gas company Petrobras.
Petrobras, the operator with a 40% stake, will jointly develop the field’s estimated eight to 12 billion barrels of recoverable reserves with partners European majors Royal Dutch Shell (20%) and Total (20%), and Chinese state companies CNPC (10%) and CNOOC (10%).
Many international companies including BP, BG, Chevron and Exxon did not participate as they deemed the Brazilian government’s terms too costly including one that required a 41.95% payment of the oil produced.
There are minimum local content requirements over the course of the project, starting with 37% during exploration, rising to 55% in the development and first production phase through 2021, and to 59% after 2022.
At peak, Libra is expected to produce as much as 1.4 million b/d.
Petrobras cited the participation of the Chinese companies in the make-up of “a strong and active consortium”, taking into account their financial strength and “the history of previous relationships of Petrobras in other business areas with Chinese companies.”
According to regulator ANP, the consortium operating Brazil’s largest oilfield, located beneath a deep layer of salt in the Santos Basin, will produce public revenues exceeding US$1 trillion over its 35-year contract. The 1,550-sq km block in 2,000m of water depth is sited 170 km off the coast of Rio de Janeiro.
The consortium expects to sign the production sharing contract in November, said Shell, which will pay US$1.4 billion as its 20% share of the total signing bonus. French major Total will also pay US$1.4 billion while the two Chinese firms will each pay US$700 million.
The consortium, expects to complete the project’s minimum work programme before end-2017 and invest a total of US$200 billion over 35 years of production.
“The Libra oil discovery in Brazil is one of the largest deep water oil accumulations in the world. We look forward to applying Shell’s global deep water experience and technology, to support the profitable development of this exciting opportunity,” said Peter Voser, Shell’s CEO.
Li Fanrong, CNOOC Ltd’s CEO, said his company’s participation marks “the milestone of a strategic entry” into ultra-deepwater exploration and production.
“It also aligns with our philosophy of seeking partnerships to expand our global footprints,” he said.
The auction was marked by street protests in Rio de Janeiro as groups fearing an environmental disaster from deepwater activities clashed with Brazilian police.