An oil rig stands in the Guanabara Bay of Rio de Janeiro, Brazil (file). Libra, with an estimated 12bn barrels of recoverable oil, or enough to meet 1-1/2 years of US oil use, is the world’s biggest prospect to be put up for auction.

Reuters/Singapore


Brazil is expecting at least 15bn reais ($7bn) from any company or group seeking the rights over the country’s largest oil find Libra, which is up for auction in October, an official with the country’s regulator said yesterday.
Libra, with an estimated 12bn barrels of recoverable oil, or enough to meet 1-1/2 years of US oil use, is the world’s biggest prospect to be put up for auction.
Production is expected to begin in five years. The $7bn figure is up by more than half the $4.6bn Brazil was considering earlier.
Brazil expects more than 1mn bpd of oil out of Libra, said the director-general of Brazil’s National Agency for Petroleum, Natural Gas and Biofuels (ANP), Magda Chambriard, on the sidelines of an industry conference in Singapore yesterday.
Chambriard was in Singapore to promote the auctions of Brazil’s pre-salt oil and onshore natural gas reserve areas.
The sale will be Brazil’s first under the production-sharing contract (PSC) model. The winning bidder will be the company or group that offers Brazil the largest share of output to sell on its own account after development costs are paid off.
Under the PSC model, once the cost of exploration and development is covered by oil sales, then so-called profit oil is shared between the contract holders and the government.
Under a 2010 law, in the sale of Libra and other un-leased areas in Brazil’s Subsalt Polygon, state-run Petroleo Brasileiro SA, or Petrobras, will have to be the operator and put up 30% of all investment, even if it is not part of the winning bid group.
The Subsalt Polygon is an offshore area half the size of Italy. It covers oil provinces that produce more than 80% of Brazil’s output and may contain as much as 100bn barrels of oil, according to Rio de Janeiro State University.
The area gets its name from giant discoveries made starting in 2007 below a layer of salt, deep beneath the seabed. Most current output and much of the remaining potential now lies above the salt layer.
Chambriard also said Brazilian billionaire Eike Batista’s flagship oil company OGX Petroleo e Gas has qualified to participate in the October auction.
“They fulfill the requirements we have and that is enough,” Chambriard said, without providing further details.
OGX on Monday slashed capital spending and pulled the plug on three offshore oil prospects as it continues to struggle to turn promising offshore discoveries into producing fields.
Once Brazil’s second-largest oil company by market value and a symbol of the country’s stalling, decade-long commodities boom, OGX shares are trading at less than 3% of their all-time high.