May 30, 2018 / 10:34 PM / in 5 months

Brazil receives no bids for contracts for pre-salt oil cargo

RIO DE JANEIRO, May 30 (Reuters) - The Brazilian government on Wednesday received no bids for three year-long contracts to buy oil cargo it received from companies producing in deepwater pre-salt fields, after a recent change in rules makes it illegal to buy the oil below reference prices.

The auction was supposed to mark the inaugural sale of oil pledged to the government by companies producing in the pre-salt, where billions of barrels of crude are trapped beneath a thick layer of salt under the ocean floor.

The first cargoes from the three areas total some 1.63 million barrels.

Royal Dutch Shell was the only company that registered to participate, Reuters reported last week. The company, which has stakes in all three offshore fields from which the oil at auction was produced, declined to comment.

A law approved last week eliminated the possibility of selling oil at a discount from reference prices set by oil regulator ANP.

As production increases from Brazil’s offshore fields, the government will receive increasing volumes of oil it will need to sell. Brazil produces nearly 2.6 million barrels per day (bpd), with pre-salt production, currently at about 1.4 million bpd, expected to rise to more than 5 million bpd by 2026.

The world’s top international oil firms have bid aggressively for rights to develop pre-salt fields in the past year. Exxon Mobil Corp, Royal Dutch Shell and BP Plc have all taken big stakes in offshore oilfields in the past year.

The oil would have been sold by Pre-sal Petroleo SA, the state company managing contracts to develop the pre-salt layer.

The winner of the three oil contracts at auction would have been required to purchase all the government’s share of output from the three fields for a year, paying the government for each load.

About 1.63 million barrels of oil up for auction were from the Mero area which is located in the Libra field of the Santos basin. It is being developed by a consortium that includes Petrobras with 40 percent, Shell and France’s Total SA each with 20 percent, and Chinese state oil companies CNOOC Ltd and China National Petroleum Corp each holding 10 percent.

The Sapinhoa field in the Campos basin accounted for 120,000 barrels. Petrobras has a 40 percent stake, Repsol Sinopec has 25 percent, and Royal Dutch Shell holds 30 percent.

Some 600,000 barrels came from the Lula field in the Santos basin, operated by Petrobras, with a 65 percent stake. Shell has a 25 percent stake there while Petrogal has 10 percent.

Brazilian rules dictate that companies vying for stakes in the prolific pre-salt must bid by promising a share of oil production to the government. (Reporting by Marta Nogueira and Alexandra Alper Editing by Matthew Lewis)

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