* Graphic on Brazil's TOR auction: https://tmsnrt.rs/35YuObI
By Gram Slattery and Marta Nogueira
RIO DE JANEIRO, Nov 5 (Reuters) - As Brazil approaches the
biggest oil auction in its history — and one of the world's most
expensive ever — the field of deep-pocketed bidders has narrowed
to less than a dozen oil majors.
In Wednesday's auction, known as the transfer-of-rights
(TOR) bidding round, firms are expected to pay up to 106.5
billion reais ($26.5 billion) in signing bonuses for fields that
Brazil says may hold up to 15 billion barrels of untapped crude.
In September, oil regulator ANP said 14 firms signed up to
participate in the auction of four TOR blocks, which could
cement Brazil's reputation as one of the world's hottest
offshore plays.
Still, a number of companies have expressed caution about
the hefty signing fees. Two firms once seen as viable contenders
— BP Plc and France's Total SA — have announced
they are dropping out altogether.
That in turn is turning eyes toward the select firms that
have remained bullish on the prospect.
Perhaps the odds-on favorite to scoop up assets is Brazil's
own state-run oil firm Petrobras, according to
conversations with several lawyers, advisors and executives in
recent weeks.
While the company is aggressively selling assets to reduce
debt, Petrobras CEO Roberto Castello Branco has made Brazil's
pre-salt region, where the TOR area is located, the centerpiece
of its long-term corporate strategy.
Petroleo Brasileiro SA, as the firm is formally known, has
already exercised preferential rights to become the operator in
two of the four areas up for grabs, which together have a
signing bonuses of about 70 billion reais. The firm will have at
least 30% stakes there.
Executives have also said Petrobras will deploy a $9 billion
payment from the government related to a dispute over the TOR
area in order to participate in the auction.
Others are betting on China National Offshore Oil Corp
(CNOOC) and China National Oil and Gas Exploration and
Development Corp (CNODC), a unit of China National Petroleum
Corp. Both are deep-pocketed, hold 10% in the nearby Libra block
and are seen preferring non-operating stakes, which could make
them a natural Petrobras partner, analysts say.
Neither firm responded to requests for comment.
In late October, Royal Dutch Shell Plc Chief
Financial Officer Jessica Uhl struck a relatively upbeat tone on
the TOR round, telling analysts it may be "a potential area"
where the firm could "invest in the long-term health" of the
company, while growing cash flow.
GETTING EXPENSIVE
The blocks are unique as Petrobras has already done major
exploratory work in the region, proving the existence of
billions of barrels of crude. As a result, the areas have very
little "exploratory risk" and are being sold off at a premium.
"I have been in Rio de Janeiro for several days. There is no
other place with greater excitement about the energy sector,"
said Carlos Pascual, senior vice president of global energy at
IHS Markit. He added that he expected "record results."
Still, despite plenty of bullish talk, a number of firms
have implied or outright stated that the auction terms are
expensive.
In addition to Total and BP, executives at Portugal's Galp
Energia SGPS SA have publicly questioned the
attractiveness of the biding round's terms on a number of
occasions.
During a call with analysts earlier in November, Chevron
Corp's upstream head James Johnson said the firm would
focus on the exploration assets the firm holds in Brazil.
"We are interested in Brazil because we see the pre-salt as
a prolific hydrocarbon basin," he said. "But we'll continue to
stay focused primarily on exploration, as we look forward."
($1 = 4.02 reais)
(Reporting by Gram Slattery and Marta Nogueira; Additional
reporting by Paula Laier in Sao Paulo and David Alire Garcia and
Marianna Parraga in Mexico City; Writing by Gram Slattery
Editing by Marguerita Choy)
