* BG Group, OGX, Total, BP among winners at Brazil auction
* Sale comes after years of sluggish oil growth, rising debt
* Last auction held in 2008 after which oil interest waned
* U.S., European companies rush in, but Asians wary
By Jeb Blount
RIO DE JANEIRO, May 15 (Reuters) - For the first time innearly five years, Brazil's flagging oil industry has receivedserious interest from private investors.
Brazil's oil agency, the ANP, sold 142 exploration areas to39 companies from 12 countries on Tuesday, wrapping up thescheduled two-day auction in just one day. It was the firstauction since a decade of annual sales ended in 2008.
Companies such as Britain's BG Group Plc and BP Plc, France's Total SA, U.S.-based Exxon Mobil Corp and Chevron Corp, and Brazil's OGX Petroleo eGas SA helped boost auction returns to a record 2.82billion reais ($1.4 billion) in cash.
The ANP expects the winners to invest about 7 billion reaisin exploration over about five years. Most of the areas are inhigh-risk frontier regions with little or no oil output.
Brazil has failed to live up to its promise to become amajor new producer as increased government intervention and anew regulations discouraged foreign and domestic privateinvestors. Oil production has stagnated and imports have risen.
But analysts said the results of the auction showed Brazilwas simply too big to ignore.
"Sure, Brazil messed up, but the auction puts things inperspective," said Cleveland Jones, an oil geologist andmathematician with the Brazilian Petroleum Institute at Rio deJaneiro-State University. "Brazil has huge potential and is amuch less risky place than Nigeria, Venezuela or Russia."
Brazil's undiscovered oil reserves in the Campos and Santosbasins, an extension of the area where giant reserves were foundin 2007, might contain as much as 100 billion barrels, he said,enough to meet the world's needs for about three years.
The ANP estimated the amount of oil on sale at Tuesday'sauction at about 35 billion barrels in place.
Among the biggest winners were Britain's BG Group Plc, which offered to pay 416 million reais for stakes in 10blocks, Brazil's OGX Petroleo e Gas SA, which willpay 376 million reais for stakes in 13 blocks, and France'sTotal SA, which agreed to pay 372 million reais for ashare in 10, according to Reuters and preliminary ANP data.Companies from Australia, Norway, Colombia and Spain also won.
HARSH ENVIRONMENT
Since the last auction, Brazil has had trouble fulfillingits potential as an oil power.
In 2008, state-controlled Petroleo Brasileiro SA, orPetrobras said it would spend $112 billion over fiveyears to boost output 50 percent to almost 3.5 million barrels aday in 2012, an amount that would have seen it pass Mexico andVenezuela as Latin America's top producer.
However, production rose only 13 percent in the five yearsto about 2.68 million barrels, while Petrobras' shares are worthless than they were before the huge 2007 discoveries.
Petrobras agreed to pay 540 million reais for stakes in 35blocks, the largest of all winning bidders on Tuesday, butproportionally less than in previous auctions.
Non-state companies have also been hit hard. Chevron Corp and its drilling contractor, Transocean Ltd faceabout $20 billion in civil lawsuits for a 3,500 barrel oil spillin 2011, even though the ANP said there was no discernibleenvironmental damage and that Chevron cleaned up quickly.
Despite these difficulties, Chevron jumped in on Tuesday topay 31.4 million reais for a stake in a block.
The auction may help Brazil break out of a cycle of negativenews and provide companies with the future reserves needed tokeep investment flowing, said João Carlos de Luca, head of theIBP, Brazil's petroleum industry association.
"I think we can put a lot of the difficulties of the lastfew years behind us," he said. "Demand was very strong at theauction; about 40 percent above my own estimates."
PENT-UP DEMAND
In the end, the world's growing demand for oil and Brazil'srelative appeal as an oil frontier drew investors back.
After an anxious lead-up to the auction, the government wasvery pleased by the soaring bids.
"We never saw anything like this," Marco Antonio MartinsAlmeida, the oil secretary at Brazil's energy ministry said onTuesday.
Brazil's OGX Petroleo e Gas SA, hurt by unfulfilledpromises, came out of the auction looking stronger. Controlledby Brazilian billionaire Eike Batista, OGX shares soared onoptimism about Brazil's potential, only to slump to near pennystock levels as output failed to meet targets.
OGX won 13 blocks at auction, 10 for itself alone and threein partnership, and was the main partner in the auction forExxon Mobil Corp, the No. 1 U.S. oil company.
Exxon picked up 50 percent stakes in two blocks with OGX for63.9 million reais, according to Reuters and the ANP - a sign the oil giant has a level of confidence in OGX that many of itsshareholders do not, the IBP's de Luca said.
OGX was up more than 5 percent during Sao Paulo trading onWednesday afternoon after rising 5.4 percent on Tuesday.
Exxon's return comes after a frustrating failure in Brazilduring the auction hiatus. It was one of the few companies inthe most coveted areas of the Campos and Santos basins not tostrike oil. Worst still, its dry areas were adjacent to some ofthe largest discoveries.
DAMAGE CONTROL, ASIA
Chevron and Exxon might be back, but Brazil could still facea struggle.
The discovery of huge U.S. shale oil and gas deposits andthe development of deepwater resources in the Gulf of Mexicomeans Brazil has more competition, said João Augusto de CastroNeves, a senior Brazil analyst for Eurasia Group in Washington.Devon Energy Corp, for example, pulled out of Brazil in2011 to concentrate on U.S. shale.
However, that could provide the incentive needed to push thegovernment to improve the investment climate.
"That sense of urgency has changed," Castro Neves toldReuters. "They are pretty cognizant of the world in terms of theshale revolution and other new discoveries. Plus, the last twoyears, they've had slow economic growth in Brazil, where the oilsector remains very important. The government is keen on gettingthese investments off the ground."
However, one group that stayed away was oil companies fromfast-growing Asian nations. Only Malaysia's Petronas,which recently bought a stake in an OGX field, was very active,but it won no blocks.
"I think the Chinese and Asian oil companies want reserveswith more promise of fast development," the petroleumassociation's De Luca said. "These frontier areas will take timeto develop."
He expected Asian companies to show up for an auction inNovember, with stricter rules, greater state control andPetrobras control. The areas will be near the huge discoveriesof 2007 that started it all for Brazil.
