* Comes as govt intervention mounts, global supply seen up
* Petrobras, Galp, OGX win blocks in early bidding
* Areas on offer believed to hold 35 bln barrels of oil
By Jeb Blount and Sabrina Lorenzi
RIO DE JANEIRO, May 14 (Reuters) - Brazil on Tuesday kickedoff its first auction for oil and natural gas rights in fiveyears, gauging whether government intervention and growth in newglobal supplies have crimped the interest that followeddiscoveries of huge offshore reserves in 2007.
The two-day auction by Brazil's national oil regulator beganwith the sale of onshore blocks in the northeastern Paranaibabasin.
Bids from state-run energy company Petroleo Brasileiro SA, Portugal's Galp Energia SGPS SA and OGXPetroleo e Gas SA, the oil startup controlled byBrazilian billionaire Eike Batista, won early blocks there.
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.
Though a record number of participants signed up to takepart in the auction, government officials, industry suppliersand others are watching the sale closely to determine how muchthe 64 Brazilian and international companies registered arewilling to bet on Brazilian oil and gas.
Officials are eager to know whether interest will remainstrong among major multinational energy companies or whethersmaller, adventuresome investors could prove more willing thanbigger 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.
The questions reflect what is a dramatically differentenergy landscape compared with the last time oil and gas rightswere sold in Brazil, a promising oil frontier where productionhas nonetheless fallen in recent years as the government haltedsales of new blocks and reworked the rules for its mostpromising reserves.
For starters, the world appears to have more oil thaninvestors believed five years go. A shale-oil boom in the UnitedStates - and increasingly successful efforts to extract oncehard-to-reach oil in Canada, Venezuela and elsewhere - mean thatbidders no longer see an industry defined by dwindling supply.
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.
Still, the potential for profit means that bidders, many ofwhom are used to operating in countries far lessinvestor-friendly than Brazil, aren't likely to show uphalf-hearted. In addition to whatever upside the blocks onauction this week offer, many investors are eager to gain orincrease exposure in a country that could still boast vastundiscovered 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."
Brazil's government has said it expects to raise more than 1billion reais ($498 million) from the sale - or possibly twiceas much as the 628 million reais in minimum bids set for theauction.
Brazilian companies are taking part despite productiondelays and sluggish development of new fields. Petrobras, as thestate-run company is known, in the second quarter of 2012 postedits first quarterly loss since 1999 and this year has struggledto ramp up output.
OGX, meanwhile, has lost nearly 90 percent of its marketvalue after the company failed to meet initial productiontargets.
Other registered foreign bidders include BG Group Plc, Chevron Corp, Exxon Mobil Corp, RoyalDutch Shell Plc, Norway's Statoil ASA, Spain'sRepsol SA, China's CNOOC Ltd, Britain's BPGroup Plc, Australia's BHP Billiton Plc andAngola's Sonangol.
BP (BP.)
