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UPDATE 1-Brazil to hold oil rights auction in 1st half of 2015

Mon, 15th Sep 2014 18:05

(Adds details of planned auction, industry complaints, auctionbackground)

By Jeb Blount and Marta Nogueira

RIO DE JANEIRO, Sept 15 (Reuters) - Brazil will hold a 13thround of oil rights auctions in the first half of next year in asale that will include new areas in the country's promisingEastern Margin offshore region, a senior mines and energyministry official said on Monday.

The auction plan, which had been presented as a possibilityby the country's oil regulator, the ANP, has now been approvedby Brazilian President Dilma Rousseff, Marco Antonio Martins,the undersecretary in charge of the oil industry at theministry, said at an industry event in Rio de Janeiro.

The sale will be the first auction of concession rightssince 2013 and only the third since 2008, when the governmenthalted annual oil-rights auctions to re-write its oil law toboost control of new "subsalt" resources near Rio de Janeiro.Subsalt resources refer to oil trapped by a layer of mineralsalts deep beneath the seabed.

The Eastern Margin, which runs along much of Brazil'scentral coast, contains some of the country's most-promisingfrontier exploration areas and is home to some large recentediscoveries, Martins said.

Rousseff's backing of next year's planned sale followscomplaints from industry executives and officials about the lackof recent oil rights auctions, which they said had reducedactivity by foreign and private-sector Brazilian companies.

The same officials have said the dominance of state-runPetroleo Brasileiro SA, which has been favored underthe new oil law, raised the risks faced in Brazil's oilequipment and service industry.

Financial difficulties at Petrobras, as the state oilcompany is known, have trickled down to the equipment andservice industry, said Joao Carlos de Luca, head of Brazil's IBPoil industry association.

"Some companies have seen their dependence on Petrobrasincrease to 90 percent from 50 percent," de Luca said.

Under concession rules, oil exploration and productionrights are sold to the highest bidder. All oil produced is ownedby the winning oil company or group. Those rights remain inforce as long as a royalty is paid and minimum exploration andlocal equipment and service contracting targets are met.

None of the areas in the next round of rights auctions willbe in Brazil's so-called Subsalt Polygon, a region created underthe new oil law that is already home to nearly 80 percent ofBrazil's output and most of its existing and prospectivereserves.

Under the new law all new rights in that area, whichstretches along Brazil's coast near Rio de Janeiro, are soldunder a production sharing system. Under production sharing, thegovernment gets a cut of all oil produced to sell on its ownaccount. (Writing by Jeb Blount and Stephen Eisenhammer; Editing byJeffrey Benkoe and Tom Brown)

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