(Corrects number of blocks to which OGX had secured rights upto that point to 8, not 78, paragraph 7)
* Comes as govt intervention mounts, global supply seen up
* Petrobras, Galp, OGX, Total, BP, BG win blocksmk
* Areas offered believed to hold at least 35 bln barrels
By Jeb Blount and Sabrina Lorenzi
RIO DE JANEIRO, May 14 (Reuters) - Global energy companieswere strong bidders on Tuesday at Brazil's first auction for oiland natural gas rights in five years, alleviating fears thatgovernment intervention and growth in new global supplies mightcrimp enthusiasm for the South American country's oil sector.
By mid-day Tuesday, only a quarter of the way through thetwo-day auction, Brazil's oil agency had accepted 1.7 billionreais ($846 million) in bids - or four times the value of theminimum bids established for those rights. Some offers for themost sought-after blocks were up to 40 times the minimum values,and regulators predicted the sale could raise as much as 2billion reais by the time it wraps up Wednesday.
The auction comes one day after state-run energy companyPetroleo Brasileiro SA, or Petrobras, successfully sold $11billion worth of global debt despite heavy criticism frominvestors in recent years because of missed production targetsand sagging profits. Demand for the bonds, coupled with strongdemand in the ongoing auction, indicate investors remain eagerto be in Brazil following discoveries of massive new offshorereserves in 2007.
After an anxious lead-up to the auction, with doubtspersisting about the interest in Brazilian oil, Brazil'sgovernment expressed joy over the soaring bids. "We never sawanything like this," said Marco Antonio Martins Almeida,Brazil's oil secretary, in an interview.
The auction kicked off with the sale of onshore blocks inthe northeastern Parnaiba basin, followed by offshore blocks inthe Foz do Amazonas basin, near the mouth of the Amazon river,and in the Barreirinhas basin further south.
Petrobras, Portugal's Galp Energia SGPS SA and OGX Petroleo e Gas SA, the oil startupcontrolled by Brazilian billionaire Eike Batista, won earlyonshore blocks.
OGX, which has lost nearly 90 percent of its market valuesince the company failed to meet initial production targets,aggressively charged into the auction securing rights to 8blocks so far, both onshore and off, through bids totallingabout 158 million reais.
Britain's BP Group Plc and France's Total SA were among the successful bidders for the offshoreAmazon blocks, located just south of a major 2012 oil discoveryoff the coast of French Guyana. Other successful biddersincluded Australia's BHP Billiton Plc, until now not abig player in Brazilian oil, and Britain's BG Group Plc.
On offer are rights to 289 onshore and offshore explorationand production blocks that add up to an area roughly the size ofBangladesh. The blocks, in regions outside the offshore swathnear Rio de Janeiro where the big recent reserves werediscovered, are estimated to contain at least 35 billion barrelsof oil, or just over a year's worth of global crude oil demand.
A CHANGED LANDSCAPE
Though a record number of participants signed up to takepart in the auction, government officials, industry suppliersand others were unsure before the sale how much the 64 Brazilianand international companies that registered would be willing tobet on Brazilian oil and gas.
Officials have been eager to know whether interest wouldremain strong among major multinational energy companies orwhether smaller, adventuresome investors would prove morewilling than bigger competitors.
Also of interest is how much appetite may come from thestate-run energy companies of other developing countries, whichare increasingly seeking cross-border ventures with like-mindedenterprises.
Doubts ahead of the auction reflect what is a dramaticallydifferent energy landscape compared with the last time oil andgas rights were sold in Brazil, a promising oil frontier whereproduction has nonetheless fallen in recent years as thegovernment halted sales of new blocks and reworked the rules forits most promising reserves.
For starters, the world appears to have more oil than whatinvestors had believed five years go. A shale-oil boom in theUnited States - and increasingly successful efforts to extractonce hard-to-reach oil in Canada, Venezuela and elsewhere - meanthat bidders no longer see an industry defined by dwindlingsupplies.
And Brazil has startled many investors since the hugereserves near Rio were discovered. Seeking greater control overfuture concessions, and a greater share of oil produced in theso-called subsalt region where the big new discoveries lie, thegovernment upended a regulatory model that had proven popularwith foreign investors since the 1990s.
'THE SIZE OF THE PRIZE'
Still, the potential for profit appears to be motivatingbidders, many of whom are used to operating in countries farless investor-friendly than Brazil. In addition to whateverupside the blocks on auction this week offer, many investors areeager to gain or increase exposure in a country that could stillboast vast undiscovered reserves.
"The size of the prize in the country is really too big forcompanies to ignore," said Ruaraidh Montgomery, a Latin Americaanalyst for energy consultancy Wood Mackenzie. "Theopportunity's just too great."
Investors are being selective, though.
While they bid fiercely for the offshore Amazon blocks,located in promising deepwater fields, the regulator saidbidders showed little interest in more speculative blocks. Onlytwo companies, for instance, made bids for three of 26 blocksoffered in shallow water closer to shore in the same basin.
Brazil's government had initially said it expected to raiselittle more than 1 billion reais from the sale.
Brazilian companies are taking part despite productiondelays and sluggish development of new fields. Petrobras, forinstance, in the second quarter of 2012 posted its firstquarterly loss since 1999 and this year has struggled to ramp upoutput.
OGX, meanwhile, symbolizes the mundane new reality forBatista, the once high-flying commodities and energy magnate whohas lost billions of dollars in net worth over the past year asinvestors sold off shares in the oil company and other ventures,which are taking longer to pay returns than initially promised.
Other registered foreign bidders include Chevron Corp, Exxon Mobil Corp, Royal Dutch Shell Plc, Norway's Statoil ASA, Spain's Repsol SA, China's CNOOC Ltd and Angola's Sonangol.
Most blocks being sold are in frontier regions, or underexplored areas with little or no existing oil or gas output.
The blocks, mostly in north and northeast Brazil, have beenbroken into four onshore and seven offshore zones across 11sedimentary basins. In addition to the Foz do Amazonas andParnaiba basins, another area likely to attract heavy interestis the offshore blocks in the Ceara basin, off the coast nearthe northeastern city of Fortaleza.
Like the rest of Brazil's offshore oil bounty, geologistsbelieve the blocks could mirror the deep subsea oil deposits offthe west coast of Africa. The deposits, scientists say, wereformed over millions of years as biological matter settled insediments deep in the rift between South America and Africa asthe two continents, once contiguous, drifted apart.
($1 = 2.01 Brazilian reais) (Additional reporting by Kristen Hays in Houston and PedroFonseca and Walter Brandimarte in Rio de Janeiro; Writing byPaulo Prada; editing by Todd Benson, Dale Hudson and BobBurgdorfer)
BP (BP.)
