2018 Will Mark the Consolidation of the Resumption of the Oil and Gas Sector in Brazil

The success of the 14th Bidding Round for blocks in the concession regime and the 2nd and 3rd Sharing Bidding, in the pre-salt, put Brazil back on the investors' map as one of the main horizons for new oil and gas discoveries in the world.

Round 14, held in September 2017, resulted in the largest signature bonus collection in the history of concession bidding – over R$ 3.8 billion. 37 blocks were acquired and the investment forecast for the Minimum Exploratory Program (set of activities to be carried out by the winning companies in the first phase of the contract) is R$ 845 million. In all, 20 companies from eight countries participated. Of these, 17 purchased blocks, covering a total area of 25,011 km² in eight sedimentary basins: Parnaíba, Potiguar, Santos, Recôncavo, Paraná, Espírito Santo, Sergipe-Alagoas and Campos.

In bids 2 and 3, carried out in October 2017 under the sharing regime, six blocks were acquired in the pre-salt polygon, generating R$ 6.15 billion in signature bonuses and planned initial investments of R$ 760 million. More important than the collection was the surplus in oil (part of the production to be shared between the Union and the company) offered by the companies, a factor used to measure the degree of success in this type of bidding. In round 2, the surplus oil premium was 261% and, in round 3, 212%.

The excellent results were the result of extensive work on regulatory improvements carried out by the Federal Government and the ANP, resulting in a more attractive business environment for investments in the sector. Examples include the end of the single operator in the pre-salt, through changes in local content, initiatives that have made the oil and gas sector more competitive, attracting investors from all over the world. There were also specific innovations for the 14th Round, such as the adoption of a single exploration phase with the possibility of extension for technical reasons, the removal of local content as an offer criterion in the bidding, differentiated royalties for new frontier areas and mature basins, in addition to incentives to increase the participation of small and medium-sized companies.

If virtually all of the major changes have already been made, now begins the challenge of improving and making investment in Brazil even more attractive, consolidating the recovery that began in 2017.

For 2018, we will have the 15th Bidding Round for blocks under the concession regime, scheduled for March 29, and the 4th Bidding Round, under the sharing regime, which should take place on June 7.

The 15th. Round will offer 49 offshore blocks – including two with potential for pre-salt discoveries – and 21 onshore. The 4th Bidding Round will include the blocks called Três Marias, Dois Irmãos, Uirapuru, Saturno and Itaimbezinho, located in the Campos and Santos basins, within the Pre-Salt Polygon.

Next year, the permanent offer of areas will also begin, an initiative that represents more opportunities for companies of different profiles and sizes. It is part of the set of measures that are being adopted aiming at the development of a diversified, dynamic and competitive sector in the different exploratory environments existing in Brazil: pre-salt, conventional sea and land. The expected results are an increase in investments and oil production, with impacts on revenue and on the generation of employment and income, especially in the selected regions.

There are 846 blocks in 13 sedimentary basins, adding up to a total area of approximately 285,400 km2, which corresponds, for example, to 28 times the area of the Recôncavo Basin. Also included were 15 areas with marginal accumulations in three terrestrial basins. The selected areas include blocks in the mature basins of Recôncavo, Potiguar Terra, Sergipe-Alagoas Terra and Espírito Santo Terra; in the new frontier land basins of Acre, Amazonas, Paraná, Parnaíba, São Francisco and Tucano; and in the maritime basins of Pará-Maranhão, Sergipe-Alagoas, Campos and Santos. The areas with marginal accumulations are in the Espírito Santo, Potiguar and Recôncavo onshore basins.

The results obtained from the efforts to restart the oil and gas sector in Brazil in 2017 could not have been better. We need to continue on this path so that Brazil can increasingly transform its natural resources into development, jobs and well-being for the population. That's our challenge.

Decio Oddone da Costa He is an Electrical and Petroleum Engineer. He worked at Petrobras for 35 years, where he charted a brilliant career: he participated in the pioneering team in the drilling of oil wells in deep waters, worked in subsidiaries in Brazil, Angola, Libya, Argentina and Bolivia, of which he was president. He was the executive manager responsible for Petrobras' international activities in the Southern Cone. He was chairman of the board of directors of several companies in the Petrobras System and others.
He was vice president of Investments at Braskem. Already retired from Petrobras, he joined Prumo Logística SA, as director of Oil and Gas Projects, and in 2016 he became the General Director of ANP.